Comments on: A Major Non-Confirmation In Gold http://www.tradersnarrative.com/a-major-non-confirmation-in-gold-3119.html Freshly squeezed market commentary & analysis Mon, 22 Mar 2010 00:43:32 +0000 http://wordpress.org/?v=2.0.2 by: dacian http://www.tradersnarrative.com/a-major-non-confirmation-in-gold-3119.html#comment-55709 Thu, 15 Oct 2009 09:22:14 +0000 http://www.tradersnarrative.com/a-major-non-confirmation-in-gold-3119.html#comment-55709 Babak, gold fell in the first half of 2008, but the fall stopped in 2008; it fell because of the high leverage of hedge funds in this market; it recovered quite fast after that (actually I guess it made a low in October). It goes up because of the reflation trade ("all goes up but the dollar"); this is pretty weird situation, as we don't have leaders for today's bull (as I said, every single asset goes up, except the dollar). Gold doesn't measure correctly inflation imo; it does well in depression or hyperinflation. By many standards (stock market crash in 2008, unemployment numbers, credit implosion, industrial output, etc.) this recession is closer to a depression than a recession; it was the same for gold in 30s, first half of depression it went down then up; an argument can be made for the 30s in favor of gold that back then we had a gold standard. It's not the case today, but gold is trading like a form of (safe) money; the speculation is rampant as well. I understand both arguments of deflationists: in deflation, money does well and gold is a form of money (I tend to agree with that); in deflation, everything goes down, except cash and today gold is not money anymore. Today we experience a reflation, no doubt about it, and the dollar is crashed again; I don't know how much it will last (maybe it's over for the $ right now, I don't know; on the LT, paper currencies are dead anyway). Maybe this is the message of gold; another reality is we have today competitive devaluation to boost exports (mathematically impossible to achieve). So there are many arguments, but one to look for is a parabolic move in gold; when it will arrive, one need to get the hell out of there. Babak, gold fell in the first half of 2008, but the fall stopped in 2008; it fell because of the high leverage of hedge funds in this market; it recovered quite fast after that (actually I guess it made a low in October). It goes up because of the reflation trade (”all goes up but the dollar”); this is pretty weird situation, as we don’t have leaders for today’s bull (as I said, every single asset goes up, except the dollar).

Gold doesn’t measure correctly inflation imo; it does well in depression or hyperinflation. By many standards (stock market crash in 2008, unemployment numbers, credit implosion, industrial output, etc.) this recession is closer to a depression than a recession; it was the same for gold in 30s, first half of depression it went down then up; an argument can be made for the 30s in favor of gold that back then we had a gold standard. It’s not the case today, but gold is trading like a form of (safe) money; the speculation is rampant as well.

I understand both arguments of deflationists: in deflation, money does well and gold is a form of money (I tend to agree with that); in deflation, everything goes down, except cash and today gold is not money anymore.

Today we experience a reflation, no doubt about it, and the dollar is crashed again; I don’t know how much it will last (maybe it’s over for the $ right now, I don’t know; on the LT, paper currencies are dead anyway). Maybe this is the message of gold; another reality is we have today competitive devaluation to boost exports (mathematically impossible to achieve). So there are many arguments, but one to look for is a parabolic move in gold; when it will arrive, one need to get the hell out of there.

]]> by: Babak http://www.tradersnarrative.com/a-major-non-confirmation-in-gold-3119.html#comment-55702 Thu, 15 Oct 2009 00:05:15 +0000 http://www.tradersnarrative.com/a-major-non-confirmation-in-gold-3119.html#comment-55702 dacian, if gold measures stress then why did it fall along with the equity market as credit markets froze in late 2008? and why is it rising now in tendem with the equity market? I agree gold is in a bull mkt now, I'm wondering what's behind it. dacian, if gold measures stress then why did it fall along with the equity market as credit markets froze in late 2008? and why is it rising now in tendem with the equity market? I agree gold is in a bull mkt now, I’m wondering what’s behind it.

]]> by: Babak http://www.tradersnarrative.com/a-major-non-confirmation-in-gold-3119.html#comment-55701 Wed, 14 Oct 2009 23:58:55 +0000 http://www.tradersnarrative.com/a-major-non-confirmation-in-gold-3119.html#comment-55701 Mak, you're right, the chart doesn't show October but I don't think it changes the thesis it presents Mak, you’re right, the chart doesn’t show October but I don’t think it changes the thesis it presents

]]> by: Babak http://www.tradersnarrative.com/a-major-non-confirmation-in-gold-3119.html#comment-55700 Wed, 14 Oct 2009 23:56:51 +0000 http://www.tradersnarrative.com/a-major-non-confirmation-in-gold-3119.html#comment-55700 thanks Jimmy - fixed thanks Jimmy - fixed

]]> by: Babak http://www.tradersnarrative.com/a-major-non-confirmation-in-gold-3119.html#comment-55699 Wed, 14 Oct 2009 23:55:39 +0000 http://www.tradersnarrative.com/a-major-non-confirmation-in-gold-3119.html#comment-55699 Recursant, do you mean to say that gold isn't just another commodity? that we haven't had manias and panics in gold? because the chart tells another tale Recursant, do you mean to say that gold isn’t just another commodity? that we haven’t had manias and panics in gold? because the chart tells another tale

]]> by: dacian http://www.tradersnarrative.com/a-major-non-confirmation-in-gold-3119.html#comment-55697 Wed, 14 Oct 2009 21:14:43 +0000 http://www.tradersnarrative.com/a-major-non-confirmation-in-gold-3119.html#comment-55697 Babak, an explanation might be that gold doesn't measure inflation but stress (it does well whene there is stress); I agree my argument doesn't explain the last months move (as there is no stress as in 2008); lately everything moves up (and the last months might be indeed related to dollar drop). I'm not sure one needs to think too much here; gold is in a bull market and bull markets go up; secular bull markets last 20 years; gold has 5-10 more years to go up (a real possibility imo). I also think gold will continue its bull market no matter what the $ does. Babak, an explanation might be that gold doesn’t measure inflation but stress (it does well whene there is stress); I agree my argument doesn’t explain the last months move (as there is no stress as in 2008); lately everything moves up (and the last months might be indeed related to dollar drop). I’m not sure one needs to think too much here; gold is in a bull market and bull markets go up; secular bull markets last 20 years; gold has 5-10 more years to go up (a real possibility imo). I also think gold will continue its bull market no matter what the $ does.

]]> by: Mak http://www.tradersnarrative.com/a-major-non-confirmation-in-gold-3119.html#comment-55695 Wed, 14 Oct 2009 15:12:26 +0000 http://www.tradersnarrative.com/a-major-non-confirmation-in-gold-3119.html#comment-55695 agree on the fact that gold isn't at new highs ex-USD, but you should probably update your chart. last few weeks have seen another push and breakout through resist at april/june/sep relative highs... def a bullish chart for intermediate term at least. agree on the fact that gold isn’t at new highs ex-USD, but you should probably update your chart. last few weeks have seen another push and breakout through resist at april/june/sep relative highs… def a bullish chart for intermediate term at least.

]]> by: Jimmy http://www.tradersnarrative.com/a-major-non-confirmation-in-gold-3119.html#comment-55691 Wed, 14 Oct 2009 05:52:59 +0000 http://www.tradersnarrative.com/a-major-non-confirmation-in-gold-3119.html#comment-55691 in the 2nd to last paragraph, i guess you meant 'inflation' instead of 'deflation.' "For example, if there is deflation on the horizon, why hasn’t it registered on the CRB?" in the 2nd to last paragraph, i guess you meant ‘inflation’ instead of ‘deflation.’

“For example, if there is deflation on the horizon, why hasn’t it registered on the CRB?”

]]> by: The Recusant http://www.tradersnarrative.com/a-major-non-confirmation-in-gold-3119.html#comment-55690 Wed, 14 Oct 2009 05:10:30 +0000 http://www.tradersnarrative.com/a-major-non-confirmation-in-gold-3119.html#comment-55690 The value of gold doesn't change, it is the value of the currency that changes. The less confidence (value) in the dollar, the more dollars it takes to purchase gold. That is why the foreign currencies do not correspond lock step with the dollar in relation to the price of gold. Try comparing the dollar versus a foreign currency and see if that spread is the same as the spread of the price of gold in the foreign currency versus the spread of the price of gold to the dollar. Gold has a tendency to remain as the world de facto currency standard, even if, Nixon released it from the dollar way-back-when. The value of gold doesn’t change, it is the value of the currency that changes. The less confidence (value) in the dollar, the more dollars it takes to purchase gold. That is why the foreign currencies do not correspond lock step with the dollar in relation to the price of gold. Try comparing the dollar versus a foreign currency and see if that spread is the same as the spread of the price of gold in the foreign currency versus the spread of the price of gold to the dollar. Gold has a tendency to remain as the world de facto currency standard, even if, Nixon released it from the dollar way-back-when.

]]>