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Great trading insight. On a less rigorous note, anyone else noticing more sellside gold commercials and a lot fewer of the "we buy old gold" variety when subjected to TV?
Can you help answer these questions from other members on NexusFi?
"Successful trading is one long journey, not a destination" Peter Borish Former Head of Research for Paul Tudor Jones speaking on conversations with John F. Carter
they are both interesting pieces mate - I particularly like the comment from the guy from the FT - "Gold is only valuable because it's always been valuable - maybe it's a 4,000 yr bubble?"
One of the problems with Gold is that it is often seen as a good hedge against inflation (historically, it is an awful hedge against inflation), and with Bernanke saying that rates will remain within this window for the next 2 years, Gold is seen as an antidote to negative real rates. Still, I think it's a bubble and it's in it's final stages of popping. What if QE3 never comes? What if deleveraging and a double-dip send the US into a deflationary cycle?
All I can say is that, to me, it looks like a bubble that is near to popping - or, at least, a major correction is due. The fact that all I see/hear/read is about how Gold will go up because of the problems with the dollar, or inflation, usually by commentators or the people on TV, make me think that the opposite is much more likely.
EDIT: If I didn't say it earlier, I wouldn't touch this trade with a bargepole because I know i have no edge in this arena. It is just an observation of mine.
Just a few things to bear in mind I think is that much of the latest legs in recent years have been euros fleeing insolvent countries such as greece etc ... There are many that are becoming less certain that the Euro will make it and probably just a matter of time before other countries lose AAA status IMO
but one day when gold does break down from wherever it goes, keep in mind that GLD ETF has been selling it's Gold since inception to pay for storage so don't be the last one out the door ....
edit: another thing to consider is that the big guys often hedge miners and physical, probably why miners have not seen much of a ride, but probably why they eventually will go through a bubble of there own IMO
"Successful trading is one long journey, not a destination" Peter Borish Former Head of Research for Paul Tudor Jones speaking on conversations with John F. Carter
It's interesting you mention the AAA thing, as it sort of corroborates my take on Gold:
Ten years ago, even 2 years ago, the idea that the US would lose it's AAA rating was unheard of, Crazy talk, it would take an armageddon for that to happen - yet, here we are, and the US has lost it's AAA rating. Has the world ended? No. Has the SP500 plummetted to 20% of it's peak? No. Have Bonds fallen through the floor to pay par? No. Has the worlds financial system gorund to a halt with a run on every US bank in the world? No. Have investors stopped buying newly issued US paper? No (infact recent 2yr auction was best ever). All things being told, not alot has changed. The only reason such an event was percieved to be so out-of-this-world is beacuse over the last 80 years people got caught up in the hubris of a risk-free United States.
Well, what if the same revelation were to happen in Gold? Even if you adjust for dollar weakness, Gold looks like a bubble. There have been no reductions in supply, supply is pretty much fixed and gold doesn't perish. The Gold Standard is behind us and the world economy is run on a fiat currency system. Gold is a soft yellow metal that has a few industrial applications (but not many), and looks nice in jewellery, but because of the economic situation, demand from both of these centres is likely to fall - and is certainly nowhere near their respective highs.
So, what's the deal? As a hedge against inflation, it sucks. It's still a bubble of you take out dollar weakness. You can't eat it, or pay for your rent with it, and it comes in inconvenient denominations. There is just as much of it as there was before, except fewer people are acutally buying the physical...
India is the world's biggest buyer of bullion and the country's wedding and festival season has boosted prices every year since 2002 with September the strongest buying month.
"Successful trading is one long journey, not a destination" Peter Borish Former Head of Research for Paul Tudor Jones speaking on conversations with John F. Carter
be careful about shorting here, it looks like alot of supply is coming in at these levels, and I would say a pop above $1800 could be a painful rally if you are trying to cover your shorts along with the last to the party going long.
Like I said, keep tight stops and look for your trades to go onside fast and hard.
It will come down when markets calm down , but there is a great deal of info on how the gold market often discovers new price highs
it's been going on for a long time, they try to suppress breakouts , with threats and warnings etc - price breaks out, new buyers get hosed - then haha gold bugs wrong - gold bugs load up - price breaks through
may want to look at gold priced in other currencies as well ....
"Successful trading is one long journey, not a destination" Peter Borish Former Head of Research for Paul Tudor Jones speaking on conversations with John F. Carter
