Inflation, deflation, gold and currencies

[Higgenbotham]

The S&P made a serious attempt to mount a late day rally over 1130 but could not. It bounced over 20 points off the 1130 level in less than 30 minutes, then collapsed again.

The futures just hit new lows a minute ago.

There's nothing magic about any particular number like 1130 but it was a logical place to buy (conventional wisdom would say so) and investors tried to buy there, only to be met with greater selling.

Now I read people who are saying they'd like to buy a final flush tomorrow morning as the public will be scared and want out. (As long as people continue to talk about buying, that may not be the right thing to do. Just a thought.)

1130 level marked with the red line.

[RDRUNR]

Guesses for gold, silver, Dow and dollar for week beginning 8 August 2011

I have no positions the US stock market.

Gold to $1750 before flash crashing on Friday as fear and greed run their course.

Silver to $43 before flash crashing early next week (after gold crashes).

DOW down 700 points by friday. (Say, 400 points on Monday)

Dollar index UP by Friday to 78 as the world realises the US Dolar IS the reserve currency and the currency of safety and international trade. There is no where else to go.

It will be an interesting week ahead, one I wouldn't want to be in oil, stocks, gold or silver. (Interesting as in not good).

That's right, I called it before it all happend. Gold and silver to go down as scheduled. No one knew the market would have gone down so much on Monday but since we are in a DEFLATIONARY TIME gold and silver will go down as well like the stock market.

I bet against gold and silver bugs yesterday and won bigger than they did. (I bet $100k FOR the US dollar by selling commodity FX)

BTW - The market lost 4 TILLION of dollars as of yesterday with the 600+ point drop. That means gold is now in an even BIGGER bubble as DEFLATION has just increased HUGE: http://video.cnbc.com/gallery/?video=3000037562

I doubt $4 Trillion dollars was purchased in gold yesterday!

Point is: Don't bet agaist the US or the US Dollar, you will lose. Don't buy PMs in a deflationary environment, you will lose.


31 years to wait for gold $ to recover is a life time of loss.

[richard5za]

I am quite surprised by the lack lustre performance of silver.

Let me try to track what has happened since Monday am

The S&P downgrade was in effect saying that they don't think to much of the forward American economic prospects nor the way in which America is managed by the current leadership. The US dollar is a fiat currency and will never default because the government can print as much as they like to pay off debts. So the downgrade has nothing to do with defaulting (idiotic Presidential and Congress theatricals excepted)

So Monday the markets dropped sharply out of stocks and into safe havens of gold and USA government bonds. Totally understandable: Poor economic prospects and poor sovereign management means stocks are less attractive; lets get the hell out of here.

Tuesday there is a partial and expected rebound and the next real danger period for stocks may well only be in two weeks time towards the end of the month; lets see.

But silver is not a safe haven! It went down instead of up! Oh! Dear! Unless I am not seeing something this suggests a high level of industrial demand for silver, rather than for investment. Perhaps it is replacing gold in jewelery?

Any comments or views?
Richard

[Higgenbotham]

The gold/silver ratio just rose through its previous post April high.

http://goldprice.org/gold-silver-ratio.html

This chart doesn't include today's prices.

At the same time, September silver futures took out last week's low while gold is near new highs.

The gold/silver ratio is a good indicator of the economic cycle. It reached a low around 16 during the peak of the 1980 inflation and a high around 100 during the early 1990s banking problems. The recent low of 32 in late April is the low for this cycle so far. The rise to 46 has been fairly rapid and should be taken as confirmation of financial stress and overall deflationary conditions.

The behavior of silver at this juncture is very critical in my view. The safe haven properties of the US dollar, bonds, and gold were seen yesterday and that is normal but silver was also up, although weaker. At the same time, oil continued to get smashed.

Stocks have been able to recover the 1130 level this morning and may thus stabilize for awhile.

One last note - looking at the long term gold silver ratio at the bottom of the link above shows us how hugely inflationary QE2 really was.

[RDRUNR]

The gold/silver ratio just rose through its previous post April high.

http://goldprice.org/gold-silver-ratio.html

I don't think anyone can trust a gold chart at a site baised towards gold (see it's URL, GOLDprice.org).

Maybe I should ask a car dealer if it's a good time to buy a car? haha.

[Higgenbotham]

I don't think anyone can trust a gold chart at a site baised towards gold (see it's URL, GOLDprice.org).

There are similar charts on my trading platform, so I know their charts are accurate. If they were biased toward gold, which way would they skew it?

[RDRUNR]

I don't think anyone can trust a gold chart at a site baised towards gold (see it's URL, GOLDprice.org).

There are similar charts on my trading platform, so I know their charts are accurate. If they were biased toward gold, which way would they skew it?

Good one! "If they were biased toward gold, which way would they skew it?"

[richard5za]

I am always interested if someone buys into a position or decides to sell out, simply because if your own money is involved thats a very sincere opinion.

Let me share my activities: I really don't like the look of equities at present; stock markets are very dangerous places right now. So all my South African gold miners were sold today, having only held these stocks for less than 2 months. Profits were not too good: 8% on investment after all expenses, but my number one rule of investing is never lose money. (If you have 100 and your objective is say 10% profit per annum, then a 10% loss puts you at 90 which means you need a 22% profit which is more difficult than a few percent at a time)

I am going to sell out of my North American miners later when the NYSE opens. So that will leave me with cash and bullion only.

Gold must surely now go through a period of consolidation, and with the next Comex Options expiry date being 25 August, I think I may not make any moves until the end of the month. Lets see.

I don't know what to do about my silver investment, quite a modest exposure: Showing a small profit at today's prices

[Higgenbotham]

I don't think anyone can trust a gold chart at a site baised towards gold (see it's URL, GOLDprice.org).

There are similar charts on my trading platform, so I know their charts are accurate. If they were biased toward gold, which way would they skew it?

Good one! "If they were biased toward gold, which way would they skew it?"

In making the comparison between a car dealer and a metals dealer, if the metals dealer is reporting prices that are higher than the market, they would get flooded with sell orders. When I call a dealer (I don't own any metals anymore, but in the past) I would first ask their current price. They don't know whether I'm buying or selling so they're pretty much roped into being honest. A car dealer on the other hand can always make some excuse as to why they have to knock the price down on that particular car.

[richard5za]

Dear RDRUNR,

If I could add to Higgie's points:

First of all you are watching prices, often in real time, on your computer screen. So you know the prices of all assets; equities, metals, debt instruments, etc

Secondly, all my trading outside of North America is done electronically, unless I want to talk to a broker to ask his opinion. I enter the buys or sells, including stop loss prices after purchase, everything, into my computer and 'click'.

Its only in North America that my broker wants voice confirmation of all buy and sell orders; so I telephone him which is a pleasure because he is just the nicest fellow and great to chat to; presumably there is some (legal?) reason for voice confirmation of orders in American?

Regards
Richard