Questions about Gold, brainstorming

[wobber]

I studied a little bit and seems gold and USD have a reverse relationship, when USD lowers, gold rises and viceversa. Also we all know gold is overpriced due to speculation. Next, assume that the world is headed to a major conflict, preceded by the fall of the USD. It means that the price of gold will rocket up to the sky. What do you think?

Economics is a very interesting and vast discipline. Like Lorentz's butterfly effect, any little stimuli in the environment can lead to a very big change. I believe that the actual monetary system will fall to it's death and also I see evidence of a very big war coming (possibly NBC and/or using advanced weaponry such as EMP or HAARP) in order to create the prerequisites to achieve the NWO, with it's ultimate goal: the control of every human in the world. I don't know in what order and when these things will happen but that's just a matter of time.

see Peter Schiff's blog: http://peterschiffblog.blogspot.com/2011/01/big-names-are-buying-gold-preparing-for.html

[S3052]

I studied a little bit and seems gold and USD have a reverse relationship, when USD lowers, gold rises and viceversa. Also we all know gold is overpriced due to speculation. Next, assume that the world is headed to a major conflict, preceded by the fall of the USD. It means that the price of gold will rocket up to the sky. What do you think?

Economics is a very interesting and vast discipline. Like Lorentz's butterfly effect, any little stimuli in the environment can lead to a very big change. I believe that the actual monetary system will fall to it's death and also I see evidence of a very big war coming (possibly NBC and/or using advanced weaponry such as EMP or HAARP) in order to create the prerequisites to achieve the NWO, with it's ultimate goal: the control of every human in the world. I don't know in what order and when these things will happen but that's just a matter of time.

see Peter Schiff's blog: http://peterschiffblog.blogspot.com/2011/01/big-names-are-buying-gold-preparing-for.html

Agree with you on the fall of the monetary system and the war risks.

However, for Gold prices in USD, the current sentiment is typical for PEAKS, not for BOTTOMS.
Gold has turned down and will undergo a major correction (targets 1150, 1050, and possibly down to 850), before the rally continues. Same for silver, copper, platinum, most commodities.

This will likely last months if not a couple of years before the fall of the monetary system will cause Gold to rally sharlply again, above 5000, etc. and Bitcoins as well...

[FreeMoney]

A price is a ratio. Everything's price has an inverse relationship with the dollar. If a dollar gets you less of something now, then that something gets you more dollars than it used to.

Gold/Dolar will go up for two reasons imo. It will go up because everything will go up (dollar going down) and because it is a money and as it becomes widely used it will gain from network effects.

The same goes for bitcoin, but I can't tell how much bitcoin will hold back gold-as-money-use.

[S3052]

at least in the short rum (6-18 months timeframe),
dollar will go up significantly (20%+)
gold will go down (-20 to -40%)

[wobber]

So far, it seems that's the trend.
On 31st of December 2010 it was 1420 USD/ounce and today it's 1342.

If it's lower than 1000 people should buy at least 1 ounce. But how do you know when to buy? One could see it's at 1100 and say: "Oh, it's gonna go lower than that, I'll wait some more". And then it pops to 1500 or whatever.

[S3052]

So far, it seems that's the trend.
On 31st of December 2010 it was 1420 USD/ounce and today it's 1342.

If it's lower than 1000 people should buy at least 1 ounce. But how do you know when to buy? One could see it's at 1100 and say: "Oh, it's gonna go lower than that, I'll wait some more". And then it pops to 1500 or whatever.

This is a valid question, indeed - and probably everyone investing and trading has those questions in his mind all the time...

Everyone may have his own method to answer it.
I can only share my personal method, which uses technical analysis and which has guided me for years successfully.

Based on the current price pattern, sentiment indicators, etc. we will likely see a deep correction that may end in the 1050 - 600 area. I know this is broad, but I will give a better update once prices get closer to 1100-1000.
We need to see the full picture then to determine whether prices fall further or build a bottom then and rise.

One good indicator is the "contrary sentiment" method: If most people believe prices will go down, we are close to the bottom. If most people believe prices will go up, we are close to the top.
For perspective: Around the 1400 $ topping area, the percentage of people believing in further rising prices was a whopping 98%. This means that they were probably all already invested and maximum 2% were left who could still buy (but this is not enough to further propel prices upwards). This is a classic example of a top. Then prices are falling and people invent multiple hypothesis why this happens...

Often it is a simple as looking at the title page of the new york times: If it says "gold will rise to 5000$" it's a good time to sell (with some time leeway +- a couple of weeks)

To come back to your question when to buy gold. My personal strategy is to buy physical gold (no paper gold) in the 800-1100 area, and accept a dip to the 600 $ area (if it happens I will buy more).
I expect prices to rally significantly against the dollar in the next 3-5 years (while first undergoing a big correction as mentioned above)

[FreeMoney]

For perspective: Around the 1400 $ topping area, the percentage of people believing in further rising prices was a whopping 98%. This means that they were probably all already invested and maximum 2% were left who could still buy (but this is not enough to further propel prices upwards). This is a classic example of a top. Then prices are falling and people invent multiple hypothesis why this happens...

This doesn't seem right to me. I'm "fully invested" in gold, silver and bitcoin, but when I earn I don't hold the extra in dollars I put it in what I think will rise in value. In other words, I'm in that 98% and I'm still buying.

[S3052]

typically you dont have enough funds to stem the selling once it has begun.

Gold has topped out and will decline much more before bottoming, unless you can invest billions

The big players including hedge funds have started to sell and/ or playing the short side

[FreeMoney]

typically you dont have enough funds to stem the selling once it has begun.

Gold has topped out and will decline much more before bottoming, unless you can invest billions

The big players including hedge funds have started to sell and/ or playing the short side

 

I'm really confused. How can you say everyone is claiming it's going higher if the big players all think it's going lower?

[FreddyFender]

Every year in mid-February, the companies that recycle and produce rare-earth metals and precious metals, must flood the market with product because of year-end and profit statements. This should bring gold back to 1050 levels or lower if speculators get nervous.

[S3052]

i should share some compelling statistics and charts to illustrate it

The short answer is:
not all are already believing in a downtrend of gold
it was 98% bullish sentiment in december
now it is somewhere around 90%
major bottoms occur when bullish sentiment is below 10%

This means there is a LOT of room on the downside before we get there

[FreeMoney]

Every year in mid-February, the companies that recycle and produce rare-earth metals and precious metals, must flood the market with product because of year-end and profit statements. This should bring gold back to 1050 levels or lower if speculators get nervous.

I really don't get this kind of claim either. Why do you think the current price doesn't factor in that fact? If it happens every year then it is free money, but there can't be free money sitting there.

[FreddyFender]

Every year in mid-February, the companies that recycle and produce rare-earth metals and precious metals, must flood the market with product because of year-end and profit statements. This should bring gold back to 1050 levels or lower if speculators get nervous.

I really don't get this kind of claim either. Why do you think the current price doesn't factor in that fact? If it happens every year then it is free money, but there can't be free money sitting there.

It is simply that they never reveal how much they have held back (recovered) until forced by year-end statements and the markets do try to include this adjustment, yet not everyone trades with this knowledge and can sometimes be stung by speculator sell-offs. I will try to find the Forex article from last spring which points this out. Adding linky soon...

[grondilu]

Well, if you believe in gold, please consider making a bid for my 20FF gold coin auction on biddingpond.com

http://www.biddingpond.com/item.php?id=246

[S3052]

Here two links about sentiment and also about the current Elliott Wave forecast that includes an outlook for Gold as well.

1. The 10 page report is free. You only need to register on the site (also for free)
http://www.elliottwave.com/club/Safeguard-Your-Financial-Future/default.aspx?code=42255


2. http://www.marketoracle.co.uk/Article25782.html see text without charts (for charts, click on the link):
"Over a month ago I began to issue a warning to traders and investors who were long precious metals that a possible correction was likely. Prices were overextended and nearly every 5 minutes a gold investment advertisement was appearing on my television. Additionally gold advertisements could be heard during commercial breaks of many right leaning radio talk show hosts, not that I listen to them or anything.

This article is not about pounding my chest, it is about a learning process that many investors fail to take the time to learn. It is easy to grandstand and speak in analogies when discussing the financial markets, but in the end the name of the game is to buy low and sell high or sell high and buy low depending on which direction a trader expects an underlying to move. I believed gold was overbought several weeks ago and while my timing was not precise, the eventual price action has followed my thought process.

The single greatest threat to profitability for investors and traders is getting caught up in the financial media and punditry. I try to stay away from the financial media at all costs as I do not want my view of the financial markets blurred or altered by the commentary of a so-called expert that I am not familiar with at all. About the time when I was calling for a correction in gold, the financial media was putting out tremendous bullish hype regarding gold and I'm guessing television channels like CNBC had commentators declaring their love and long term desire to own gold in their portfolio.

This is not to say that gold will not work higher in the future. In fact, research from fundamental and technical analysts suggests that gold prices could continue going higher for several years as the United States continues to devalue our currency while running massive budget deficits. No one really knows for sure what will eventually happen, but it would not be shocking to see gold continue to rally in the future. However, the shiny metal needs to wash out some weak owners by moving lower and working off long term overbought conditions before making a run at breaking out to new highs."

[S3052]

Another interesting article about Gold

http://www.elliottwave.com/freeupdates/archives/2011/01/21/-Everyone-Knows--Gold-Should-Be-Rising----Why-Is-Sinking-Instead.aspx

[fergalish]

4. Not actually a question. I want to learn as much as possible about precious metals and why are they so valued for thousand of years.

Just a humorous (but correct) page to answer the question "why gold?".  Well, because it's the only thing that could act as a form of money.

http://www.npr.org/blogs/money/2010/11/18/131430755/a-chemist-explains-why-gold-beat-out-lithium-osmium-einsteinium?ft=1&f=93559255

[S3052]

here is a new chart, comparing bitcoins vs. Gold.
http://www.bitcoinbullbear.com/index.html

[johnyj]

After I read about that china has become the biggest gold supplier in the world, and there are many source indicated abundant of gold mine store under 500 meter depth, I started to short gold

With help of today's machinery, mining gold can be as fast as pumping out oil, and I don't think chinese will act like OPEC countries to limit the gold output in order to hold the price stable

[anu]

I dont have time to argue now, but gold will keep going up until the crisis is over, that is it will go up for 4 or 5 years more. If you believe the crisis will be over tomorrow sell your gold now. In all the big crisis the DOW/gold ratio goes to near 1 and we are still at 7. I wont sell until that ratio goes under 3.

Some assumptions in there. Most importantly, the crisis can force ppl to sell. This is what happened when the price dropped lately. And this will get worse once the crisis hits the real economy. If the crisis get really bad you might get a Kilo of Gold for a 20 Kilo Sack of Rice. So if you think we're heading for a terrible crisis, don't fill your safe with gold, fill your basement with sacks of rice and corned beef.