Gold, Silver and Other PMs

Top 562. Dec 8, 2005 5:47 PM

» 2win - Thanks. Locked in gains.

In response to Re: Another Gold Opinion posted by gadget767:

Thanks. Your question prompted me to sell 62% of my Scudder Gold & Precious Metals Fund, in order to lock in gains of 49.3% since May 17. I fully expect gold to continue its irrational rise, but not in a straight line. And when I do jump back into gold -- after it corrects to $480(?) -- it would be nice to find an investment vehicle that, unlike SGDAX, at least matches the performance of the ^XAU index, which gained 54.2% during that same time period.
Before today's redemption, 15% of my portfolio was in gold.
Dave J.

-- posted by 2win

Top 563. Dec 8, 2005 7:33 PM

» gadget767 - Re: Thanks. Locked in gains.

In response to Thanks. Locked in gains. posted by 2win:

My question prompted you to sell? It's hard to know what to do with it, short term, which is why I asked what Norm was doing. I have the same problem with oil service....I really like it, basically, but it's subject to the whims of fast money trading on the weather and phase of the moon.

My gold holding is FSAGX, which has actually done a little better than ^XAU over the past year.

-- posted by gadget767

Top 564. Dec 8, 2005 8:33 PM

» Normxxx - Re: Re: Thanks. Locked in gains.

In response to Re: Thanks. Locked in gains. posted by gadget767:

My suggestion is hold on, but lock in some gains with (slightly out of the money) LEAP puts (> 1 year). What you want to do is build up an inventory of leaps, both calls and puts. Puts for now as the market goes up; calls as the market goes down. For example, it would be ideal to be holding calls around $480 - $500 and puts around $510 and higher.

I prefer options on the mining stocks rather than the metal.

______________

The content of this message is not to be construed as constituting market or investment advice. It is intended for educational purposes only. Individuals should consult with their own advisors for specific investment advice.

-- posted by Normxxx

Top 565. Dec 9, 2005 2:53 AM

» 2win - Re: Re: Thanks. Locked in gains.

In response to Re: Thanks. Locked in gains. posted by gadget767:

That is, your question to Normxxx prompted me to notice the ^XAU price is fast approaching his original sell target. Now gold can go up or down, and it's fine with me.

-- posted by 2win

Top 566. Dec 9, 2005 12:17 PM

» Kirk - $520 Gold - Chart

.
Gold Chart

Wow! Congratulations to the Gold Bugs here!

I'd be taking profits here if was in gold... pretty much max distance from the 200 DMA on this log chart.

Hi Ho Silver!

Looks like a key resistance at 8.17-8.50 is gone now.

-- posted by Kirk

Top 567. Dec 12, 2005 12:35 PM

» Normxxx - CAUTION!

CAUTION!

I have received several ST and IT SELL signals about here; so for those that feel they could not stomach a 10% - 20% ST drop in Gold; I would strongly suggest partial selling, tightening up or raising stop loss order points. Gold has gone parabolic— even after the COMEX raised the margin requirements to 50%. Expect Gold to drop as rapidly very shortly! (I think the CBs may decide to sell some gold about here!)

But note: the LT BULL is still on and may yet have years to run!

-- posted by Normxxx

http://safehaven.com/article-4273.htm

Top 568. Dec 12, 2005 10:37 PM

» permabear - US Money Printing to Continue!

December 13, 2005

US Money Printing to Continue!
by Marc Faber

From recent US Federal Reserve Board meeting minutes, it would appear that monetary policies will move from a tightening bias to a neutral or easing mode within the next six months or so. In the past, I have maintained that the US, with a debt-to-GDP ratio of over 300%, has no other option but to print money (see figure 1).

Figure 1: Total Credit Market Debt as % of US GDP, 1916 - 2005

Source: Bridgewater Associates

Tight money policies, which would depress asset prices such as stocks and home prices is simply not an option the Fed will consider. As a result, inflation will continue, whereby I am using here inflation as defined by a loss of the purchasing power of paper money. At times, such as in the 1970s, this loss of purchasing power of money is brought about by rapidly rising consumer prices, while at other times, such as in recent years, the purchasing power of money diminishes because real estate, stock, art and bond prices increase significantly. In both cases, under consumer price or asset price inflation, your dollar today can only buy a fraction of what it bought ten or twenty years ago (see figure 2).

Figure 2: Purchasing Power of US Dollar, 1800 - 2005

Source: Barron's

What is remarkable about figure 2 is that for as long as there was no Federal Reserve Board - that is between 1800 and 1913, the purchasing power of the dollar was more or less constant. However, as soon as the Fed was formed in 1913, the purchasing power began to decline - in fact by 92% over the last 100 years or so.

Now, considering that Household Net Worth is at an all time high and that rising home, and equity prices in the last twenty years or so drove the US economy up and the household saving rate down (now negative), Mr. Bernanke will under no circumstance allow asset prices to decline much (see figure 3)

Figure 3: Household Net Worth, 1950 - 2004

Source: Merrill Lynch

Just imagine what the Fed's reaction would be if both the Dow Jones and housing prices dropped by 10%! Money printing would be back in earnest Just imagine what the Fed's reaction would be if both the Dow Jones and housing prices dropped by 10%! Money printing would be back in earnest because the Fed believes (erroneously, I may add) that it has the power to indefinitely postpone recessionary periods.

Now, if the Fed prints money, all asset prices will rise in nominal terms whereby some prices will rise more than others, while the currency of the money printing country - the US - will weaken. The only problem for us investors is to recognize and forecast, which prices will increase the most, consumer prices or asset prices, and if asset price inflation continues, as occurred in the past twenty years, specifically which asset prices will move up the most. Moreover, if the US dollar weakens it is important to define against what the dollar will depreciate.

The importance of being invested in the "right asset class" is evident from the diverging performance of the Hang Seng Index or of Hong Kong property prices and oil since 1997. So, whereas the Hang Seng Index and Hong Kong property prices have not risen, since 1997, crude oil is up by more than four times! I would expect similar diverging performances among different asset classes to emerge in future as well. In particular, I am a believer that at some point in future, investors will lose faith in the value of US dollar denominated bonds and in the US dollar. At such time, investors will drive US interest rates much higher resulting in tumbling bond prices and rush into anything but US assets such as equities and bonds. This does not mean that all US dollar assets will collapse in nominal terms, but they could collapse against a "hard currency" such as gold or possibly against non-US dollar currencies, provided foreign central banks pursue tighter monetary policies than the US. This, however, is an issue about which we cannot really be certain, as all central bankers have a propensity "to print money". Therefore, I feel that asset prices will tend to depreciate against the only currencies for which the supply is limited - gold, silver, and platinum.

I have shown the Dow/Gold ratio in the past but would like to expand on this theme. As can be seen from figure 5, the Dow/Gold ration has fluctuated over time between 1 and almost 45. When the Dow/Gold ratio was under five, gold was expensive and equities were cheap. Conversely, when the Dow/Gold ratio was over 20, stocks were expensive and gold relatively cheap (see figure 4).

Figure 4: Dow/Gold Ratio, 1900 - 2005

Source: www.sharelynx.com

Now, it is interesting to observe what has happened since 2000. At the peak of the stock market in March 2000 the Dow/Gold ratio stood at close to 45. In other words, it was for a "gold money" holder very expensive to buy one Dow Jones Industrial Average since it took 45 ounces of gold to buy the Dow. Thereafter, stocks collapsed into October 2002 and, therefore, the Dow/Gold ratio also declined. What is, however, interesting is that despite the stock market's rebound since October 2002, the Dow/Gold ratio has continued to decline. Simply put for the holder of gold - the world's only honest currency, since it cannot be printed by some dishonest central banker - the Dow, although it increased in value in dollar terms, has continued to decline in gold terms with the result that, today, it "only" takes 20 ounces of gold to buy one Dow Jones Industrial Average. Simply put, since 2000, gold has risen at a much faster clip than the Dow Jones and I would expect this out-performance to continue for the next few years until "gold currency" holders will be able to buy one Dow Jones with just one ounce of gold.

So, if Mr. Bernanke does what he believes in - namely that asset deflation has to be avoided at all cost and, therefore, massively prints money, no matter where the Dow will be in future, at 36,000, 40,000, or at 100,000, as some pundits predicted in their in 1999 published books (of course shortly before the market tumbled), you will be able to buy the Dow with ounce of gold worth either $36,000, $40,000 or $100,000. Now, you may think that I have become insane. That is partially true because I am convinced that the US Fed's monetary policies will lead to exponentially widening wealth inequity and impoverish the majority of US households, which will then lead to social strive, protectionism, war, and the breakdown of the capitalistic system. However, if one considers that in 1932 and in 1980 (see figure 5) one could indeed buy one Dow Jones Industrial Average with just one ounce of gold, then maybe my views are rather conservative. Possibly one will be able to buy, sometime in future, one Dow Jones with just half an ounce of gold!

Therefore, rather than to buy US stocks, I suggest to invest in gold, whereby right now, both the Dow and gold, as well as most other investment markets are significantly over-bought and could easily correct by about 5% to 10% on the downside.

There are some more issues we need to address. What about if the "deflationists" such as my friend Robert Prechter, whose arguments I highly respect, are correct and deflation brings down the Dow Jones, home prices, and all other assets by 50% or 90% in value? In such a scenario, I would expect that there would be serious debt defaults, a collapse of the derivatives market, and an imaginable banking crisis leading investors to rush into an asset that is not a liability of somebody else. Therefore, I believe that if the Dow Jones declined to say 5,000, gold might actually rally further.

What about the US dollar's value against other currencies? This year the US dollar has been strong, but I would expect other currencies to strengthen against the US dollar once the market realizes that the Fed will print again money. At the end of 2004, investors bet heavily against the US dollar and sentiment about the dollar was extremely negative. Today, however, we have the opposite situation with speculators being extremely positive about the dollar and negative about non-US dollar currencies. In fact, the speculative positions on the dollar stand at a record high (see figure 5).

Figure 5: Net Speculative Positions on the US Dollar, 2002 - 2005

Source: The Bank Credit Analyst

So, I would gradually move some funds out of dollar assets into the Euro, Swiss franc and Yen and even better continue to accumulate gold, silver and platinum.

Regards,

Marc Faber
GloomBoomDoom.com

-- posted by permabear

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

Top 569. Dec 12, 2005 10:53 PM

» permabear - WEIRD GOINGS-ON IN THE GOLD MARKET

WEIRD GOINGS-ON IN THE GOLD MARKET

To say that the price of gold has been behaving somewhat strangely lately – is perhaps a bit of an understatement. In fact, the steady [bordering on dramatic] rise in the price of gold is becoming almost impossible to ignore. Consider, if you would, the following:

For the past few years at least, gold has been mostly portrayed in the greater mainstream financial press as being the ‘anti dollar’ – generally exhibiting strength when the dollar has shown any sign of weakness and vise versa on the slightest sniff of weakness. This previously adhered-to axiom has changed markedly in the past few months – seemingly confounding so many of the “experts” that our responsible mainstream media trots out every other day to explain the machinations of today’s gold market.

To illustrate the defiance of such widely held views, note that the price of gold [as depicted by GLD] has risen dramatically, of late, from sub 450.00 per ounce as recently as late Sept. 05 to
over 530.00 per ounce at the time of writing – Dec. 11, '05. Meanwhile the U.S. dollar – as depicted by the U.S. Dollar Index – has clearly strengthened over the same time period:

So What Gives?

What it all boils down to, folks, is that mainstream punditry has no credible explanation as to why gold has rallied in the face of a strengthening U.S. Dollar.

Both charts above clearly point to late August '05 as being a definitive turning point in the relationship between the price of gold and the U.S. dollar. What stands out in my mind as being ‘of significance’ where this relationship is concerned is that GATA [Gold Anti Trust Action Committee] held their historic Gold Rush 21 conference [Aug. 8th and 9th] in Dawson City, The Yukon – Canada. GATA has long maintained that the price of gold has been surreptitiously suppressed - primarily by U.S. monetary interests [Fed and/or Treasury] in contravention of anti trust laws in the United States. GATA has long held the position that the price of gold could rise dramatically – without a required sell off in the U.S. dollar – but as a result of an enormous [and dangerously reckless] “short position” in COMEX gold futures that regulators have ‘tacitly’ not only allowed to be established - but maintained. That’s slightly better than 16,000 tons in a market that has an annual supply demand deficit of approximately 1,500 tons – currently being ‘satisfied’ with gold from the vaults of Central Bank’s sovereign stocks.

GATA’s Gold Rush 21 did much to illuminate this situation by informing a great many foreign dignitaries to this [and other] glaring imbalance[s].

COMEX Trade Now Versus Then

In the words of GATA’s Bill Murphy, reacting to the most recent COT [COMEX open interest trade data] report:

The gold open interest just came out … more confirmation of what I wrote early this morning. It FELL 1905 contracts to 340,860 on a $5 move up in the gold price. Gold has now risen $75 per ounce with its open interest falling more than 30,000 contracts off of its old high this year. That is ASTOUNDING! More evidence the trapped shorts are doing everything they can to cover their positions.

Now, if you contrast this revelation to what had been the “norm” for years prior to Gold Rush 21:

….many years ago when the gold open interest rose 77,000 contracts over a few weeks on a $7 gold rally. At the time the gold open interest was only around 220,000 contracts….

Now, let’s remember that COMEX warehouses serve not only as depositories for ‘gold for sale’ – but also as a warehouse for folks who strictly want to ‘store’ their gold and silver. Then, consider that in December '05 alone as pointed out last week by a regular contributor at Bill Murphy’s subscription site Letmetropolecafe.com:

Meanwhile over on COMEX, one gold contract and 5 silver contracts were delivered bringing the December totals to 1,708,600 oz of gold and 30,470,000 oz of silver. As Bill Murphy has observed, none of these deliveries are leaving stockpiles so it is difficult to judge their significance. I say that none of these deliveries has left stockpiles yet, but they will. There is an extreme shortage of silver out there and gold is also tight. That makes COMEX stockpiles a target for a run on the last available supply and to do that, and not spook the spot market, the wisest strategy is to leave the metal in COMEX storage. Too many people watch the stockpile totals, yet few will realize until too late that the ownership has changed.

The long and short of what this all means folks, is this:

The dudes who formerly shorted gold futures with ‘reckless abandon’ now appear [statistical evidence – COT data - supports this contention] to want no part of the same. In fact, it would appear that already in December – alarmingly, better than ¼ of all gold stocks held at COMEX warehouses has changed ownership with no substantial or meaningful decrease in the aggregate shorts. These same folks now appear to be ‘trapped short’ with no way to buy their positions back without sending the price of gold to the moon.

Merry Christmas to all – especially if you happen to be ‘long gold.’

-- posted by permabear

Top 570. Dec 15, 2005 1:21 PM

» Normxxx - Another View of GOLD

Another View of GOLD

______________

The contents of this letter/report does not necessarily reflect the opinions or viewpoint of normxxx. They are provided for informational/educational purposes only.

The content of this message is not to be construed as constituting market or investment advice. It is intended for educational purposes only. Individuals should consult with their own advisors for specific investment advice.

-- posted by Normxxx