Gold, Silver and Other PMs

» Normxxx - Re: The War On Gold And Silver

In response to message posted by Normxxx:

See http://www.financialsense.com/fsu/editor...

for the rest of the story. . .

-- posted by Normxxx

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» Normxxx - PM IT Outlook

The COT numbers for gold were pretty much what you would have expected for the week of a top. Commercial gold futures traders this week moved to a very large net short position, exceeded in all of the COT data only by the February and September 2003 highs (measured in percentage terms). Consequently, the non-commercials who take the other side of most of those positions are net long by a huge amount. Such high levels have been indicative of price highs for the last two and a half years, although they don’t necessarily call the moment of the top; for that job, I use Timing Model signals. I still think that we will see a higher gold price high in 2004; likely a top in April, but to prepare for that advance the gold market has to convince enough people that it cannot and will not go higher here. As soon as a sufficient number of people become convinced, then the next advance can begin.

A similar situation exists in the COT data for silver futures. The net short position (in percentage terms) for commercial silver futures traders is just about as high as it has ever been, and there is no justification from the historical data to expect silver prices to continue higher after seeing such a high reading in this indicator. Inasmuch as silver price movements are correlated with gold and other precious metals, I therefore should expect at least a period of consolidation in all of the PMs before any further price gains can be expected.

I should mention that this week’s COT report showed that commercial Dollar Index futures traders were long 13,467 contracts and short 1,997 contracts. Clearly, these smart-money traders are expecting a rebound in the value of the dollar. Remember that, for the most part, the PMs and the dollar trade inversely.

Right now, I have reduced the IT Tradable portion of my Gold Funds allocation to 0% (which reduces my total Gold holdings to 50% of their maximum); not because I think I will necessarily get a better entry for that portion of my holdings in the next several weeks, since Gold is as likely to trade sideways as down, but for prudence and to have as large a cash holding as reasonable until mid-January, when we will get a better handle on what will transpire in all of the markets for next year (maybe?).

-- posted by Normxxx

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» Normxxx - Zeal says. . .

Gold in Euros and Yen 2   full text

by Adam Hamilton, December 26, 2003

It is kind of funny, but at least once a week I receive an e-mail from a European investor that goes something like this... "Adam, you keep writing about a gold bull. What gold bull? That rally that you Americans are calling a gold bull is really just a drop in the US dollar."

And, of course, these astute European investors have an outstanding point. Every American investor and speculator today has grown up in a US-dollar-dominated world, and we Americans have a tough time thinking of anything including gold denominated in other non-dollar currencies.

2003 year-to-date, USD gold is up by a very impressive 17.9%. Euro gold, however, has actually fallen by 0.1% or so in 2003, at best an uninspiring flat-lined market unable to break through the fabled heavy resistance at E350 thus far. Once again yen gold is in the middle, with a modest 6.6% gain in 2003. The international perspective on gold's performance this year is very different outside of the dollar-dominated realm in which we Americans are so comfortable.

<img src="http://www.safehaven.com/images/zeal/119..." width="500" height="350">

-- posted by Normxxx

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» Normxxx - The Silent Correction in Bullion

The Silent Correction in Bullion,
Tactical Investor   full text
by Sol
December 26, 2003

“The freedom to make a fortune on the stock exchange has been made to sound more alluring than freedom of speech”
John Mortimer 1923-, British Barrister, Novelist

This Article is a follow through to the Contrarian Round Table and The Sneak Fed Attack On The Metals Market. The most interesting part of this Gold Bull market is there is more bull being sold than Gold. We have too many promoters jumping up and down claiming that Gold shares should be bought at any level and that there is nothing to fear. I have and will always take the position that buying Gold and Silver bullion on any decent pull back, is a very wise investment. Buying Gold shares or any other shares is just another form of speculation-- you can get your head handed to you on a platter or make a fortune. When you start buying Gold shares, you need to pay particular attention to Technical Analysis as these shares can take off much faster than Gold bullion, and correct much harder too. I have 13 charts of Gold priced in 13 different currencies. As you can see, Gold has been correcting in all the currencies, except in terms of the US dollar. In some currencies the correction is more severe than in others, this simply means that for the time being the market has deemed these currencies to be the strongest ones out there.

When looking at the strongest of them, the South African rand, the Namibian dollar and the Lesotho loti, we see that gold has lost up to 125 dollars in value when these currencies are converted to dollars. So if we add this figure to the price of gold in February, Gold would have to be at around 455 dollars just to break even. But Gold is not there, which means that the central bankers are still retaining the edge.

At this point one of two things has to happen, either Gold has to rally in all currencies, particularly the Rand, or the dollar starts to rally while the rand and other stronger currencies start to pull back. This will have the effect of increasing the earnings of South African gold mining companies, which will have a positive effect on their share prices. The question is which one of these two scenarios will unfold.

I think that it is far more likely that the US dollar will start to put in some sort of short term bottom in the near future as a continual plunge will start to make the Asians very jittery, and if they started to lighten up on their Dollar reserves, then all hell would break lose and the Feds know this, so expect some sort of Dirty scheme to unfold soon.

Whatever method they chose to employ, the breakdown of Gold below 400 could push many to sell and lock in their gains. This sell off will produce another mouth watering chance to load up on Gold and Silver bullion and for those that want to speculate, you will be able to load up on Gold shares at very pleasing prices. However 1-2 years from now I see Gold at much higher levels, but in the interim some sort of pull back would be healthy

-- posted by Normxxx

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» Normxxx - Richard Russell on GOLD

Richard Russell On Gold

Can the government create wealth? No -- governments create expenses. The Founding Fathers were well aware of this, which is why, almost to a man, they wanted limited government with as few foreign "entanglements" as possible.

Why do the top men in government today want? One word describes it -- POWER. Yeah, they can call it patriotism, leadership, service -- but I call it POWER.

In order to retain power, our leaders in government must create the illusion that they are "giving us something." The government taxes us and returns part of the tax-take in the form of government, more government and still more government.

But the tax-take doesn't provide all the gifts that the government bestows on us. As the spending increases, the government creates another illusion. The government tells us that it alone can create wealth (money). Actually, back in 1907 a group of greedy "stealth bankers" formed a money-manufacturing machine which they call the Federal Reserve. The Federal Reserve is the entity that creates "wealth" without working and without sweat. This wealth is accepted by the American people and the rest of the world -- although the rest of the world now accepts the Fed-created "wealth" with increasing skepticism.

Our government states that the Fed-created "money" is legal tender for the payment of all debts. Thus, the money that the Fed creates is wealth by fiat. The government simply states -- this is money.

But as usual, the government creates too much of its legal tender. And when that happens, wise men become suspicious, and their thoughts turn to real money -- gold.

Gold is "all right" as far as the government and the Fed are concerned as long as it "behaves," meaning as long as it remains in a trading range. And all the while the government and the Fed tell the people that gold is just a "relic of the past," and that holding gold is a lost cause, since gold is "going nowhere, and it pays no interest." In fact, we are told that "gold is just another commodity, and an outmoded and useless commodity at that."

But wise men know better. Wise men know that for 5,000 years gold has been considered MONEY.

So is gold just a commodity? If it is, then gold will trade like a commodity. Ah, but the problem is that gold is not now trading like a commodity, and we can easily prove it.

It's been said that all economics can be reduced to a FLOW OF FUNDS. So saying, let's examine some flow of funds with the help of a chart.

The P&F chart below shows gold in relation to the CRB Commodity Index. And what's this? Gold is rising in relative strength against a basket of commodities! Gold has ceased to act like a commodity.

We see two rising blue bullish trendlines. Let's refer to the second or the more recent rising trendline. The ratio hit a low in October, 2002 (marked "A" on the chart), and since then gold has again been rising in relative strength against the CRB Commodity Index.

Gold is now at a very interesting juncture. Gold is pressing against the top of the whole structure. We see a peak at 1620 back in June 2002, and two more peaks this year just a bit lower at 1610 (number printed in red). Gold is now in position to break out against all three peaks. If this happens, I believe we will experience a "different feel" to gold. The gold bull market will feel more "insistent," more "powerful," more "visible." Gold, in effect, will break out big-time against all commodities.

<img src="http://www.gold-eagle.com/gold_digest_03..." border="0">

Next, how about gold against stocks? Below we see a chart of exactly that -- gold divided by the S&P 500. Note that the ratio is holding above the rising blue trendline in favor of gold. But starting in July of 2002 a "battle" began. Here we see the ratio reaching a high in February 2003 (red 2), then backing off in June, and most recently forming a rising vertical line of X's starting in September. But remember, all this is taking place above the rising blue line, which indicates that on a longer trend basis gold is outperforming the S&P.

The question -- will this ratio break out above its peak to the 45 box, or will it break down to the 34 box? If gold breaks out to the 45 box,it will mean that gold has reached a new peak of strength against the broad stock market. If this is to occur, the first step would be for the ratio to hit the 42 box, which would be a "triple-box breakout."

<img src="http://www.gold-eagle.com/gold_digest_03..." border="0">

Exciting times are coming up in 2004. And hopefully, my subscribers and I will be on top of it.

The FLOW OF FUNDS -- that's what it's all about. Our job -- to go with the flow.

I believe the flow, an incredibly important flow, is towards real, honest money. I'm not talking about money created "out of thin air" by the Fed, I'm talking about money created through the expenditure of capital plus the sweat of tens of thousands of men -- I'm talking about gold, dear subscribers, I'm talking about gold (and by the way, I'm also talking about silver).

Richard Russell
Editor-in-chief - DOW THEORY LETTERS
www.dowtheoryletters.com/dtlol.nsf

-- posted by Normxxx

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» 2win - Re: Zeal says. . .

In response to message posted by Normxxx:

Euro gold, however, has actually fallen by 0.1% or so in 2003, at best an uninspiring flat-lined market unable to break through the fabled heavy resistance at E350 thus far. The international perspective on gold's performance this year is very different outside of the dollar-dominated realm in which we Americans are so comfortable.

The Dec. 11th issue of The Economist magazine carried an article about the strong rand, South Africa's currency, titled, "The Grand Rand: South Africa's surging currency. Is it really too strong?"

Can we see a chart comparing the value of gold relative to the rand during 2003?

Dave J.

-- posted by 2win

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» Normxxx - Re: Re: Zeal says. . .

In response to message posted by 2win:

See http://www.suite101.com/discussion.cfm/i...

-- posted by Normxxx

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» Kirk - This Bull Market in Metals is Just Beginning... BELIEVE IT!

.
This guy makes a good case for it but I am not sure I believe his charts. For example:

<img src=http://www.financialsense.com/Market/arc...>

I've seen tables and discussion that says there is a surplus of Gold... so who to believe?

http://www.financialsense.com/Market/wra...

Excerpt: This is where I believe we are today. As Eric King and I wrote in “To the Moon, Alice!” we are going higher, much higher than anybody can possibly believe. This new bull market in metals is just in its formative stage. At this point you want to hold on to your positions and accumulate more shares and bullion on any setbacks. Trying to trade your way in and out of this new bull market can be detrimental to our financial health. Most of the wealthiest people I have met in the investment world have not been traders. They were INVESTORS. Unless you are absolutely confident that you can trade in and out of this market, always buying in at the bottom and always getting out at the tops, you will find it more profitable to hold your positions and adding to them on the dips.

It's time you became a believing investor.

-- posted by Kirk

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» Normxxx - Re: This Bull Market in Metals is Just Beginning... BELIEVE IT!

In response to message posted by Kirk:

It is useless to calculate a Gold 'surplus' or 'deficit' as with any other material thing. Gold is like a bank. So long as the world's (fiat) money system is working well, Gold is used almost exclusively for jewelry and some commercial items (electronics, dentistry, etc.). Even in countries with unstable currencies, paper money of a more solid country (e.g., the euro or dollar) is preferred since it is easier to handle, its value is plain, and it is harder to counterfeit.

But when (as now?) the value of all paper currencies seem increasingly unstable, this can change in a twinkiling of a Goldbug's eye. Then there is a run on Gold and its value can go anywhere. At the moment, speculators are increasingly dominating the market for Gold, driving up its price. Gold seems to have broken free of the dollar. (Yes, Gold was pegged to the dollar, not conversely, when the dollar was backed with Gold.) This kept the value of Gold, even as a commodity, severely depressed, and we were essentially able to export our own inflation. Charles De Gaulle got tired of this, decided to end it, and demanded Gold for paper dollars until (in 1971) Nixon severed the dollar tie to Gold.

After 1971, when the dollar tie to Gold was completely severed, Gold ran up (in the inflationary '70s) and then crashed. It finally bottomed around the cost to mine it (about $250 a troy ounce three years ago; about $330 now that the dollar has been devalued).

However, there is no real shortage of Gold, only a shortage of tradeable Gold. Central banks hold well over 1 billion troy ounces of Gold-- over 10,000 tons of it. And they will sell portions of it, or lend it out to the short sellers, whenever they think the stability of their own or the world's currencies are threatened. They have done so in the past.

They like to wait until the frenzy seems at its peak and they can crash the value of Gold by a bold move overnight. That's the fly in the ointment the Goldbugs ignore or try to wish away.

So there you have it. Buy Gold and risk having its value crushed overnight by the CBs or not buy Gold and risk having the value of your paper dollars sharply devalued (its already dropped about 40% against the euro). My bet is there is at least one runup in the dollar (and Gold price collapse) due before the value of the dollar collapses and the world economy collapses with it.

My bet is partly on Gold and partly on commodities such as copper and oil. I need to start a new asset class in non-Gold commodities. I hope I haven't waited too long. But recognize that if the world economy collapses, the price of commodities collapses with it. There ain't no free lunch.

-- posted by Normxxx

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