Archive through October 25, 2004

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rederob

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Post Number: 366
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Thursday, October 07, 2004 - 04:44 pm:

archer
Let's not worry about prettiness and move on to the action, the trend, and maintain this thread's utility.
First, POG has not fallen below $400 since Sept 13 and been over $415 all this month (yes, I know that is only 5 day's action so far!).
This is important because POG has risen appreciably in euro terms (presently euro$340). In other words, movements in the USD have had negligible impact on POG.
In AUD terms POG remains range-bound from AU$570-580 (presently AU$577.50).
Gold will stay propped with high oil prices and pick up on any "safe haven" issues that can arise. And oil is poised for at least another week of price increases while US inventories remain low and strike/sabotage threats linger in Nigeria and Iraq, let alone the Yukos dilemma in Russia.
It's all good.

bandicoot02

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Thursday, October 07, 2004 - 05:52 pm:

Heres an exciting forcast for the Gold Bulls.

Forecast gets the bull bellowing

--------------------------------------------------------------------------------
By Brendan Ryan
Predicting the gold price is a black art, but one of the best practitioners is Martin Murenbeeld. His views are highly relevant as the metal breaks above $400/oz yet again.

Murenbeeld is a US-based economic consultant. In September last year, presenting at the gold industry's Denver Gold Forum, Murenbeeld forecast that gold would average $400/oz, with a 55% probability.

As he told this year's Denver conference: "It wasn't a bad forecast. Gold has averaged just over $400 for the year to date. Our base-case scenario had gold at $398 and the probability-weighted forecast came in at $405."

Which is why Murenbeeld's views on gold's prospects for 2005 have made the bulls restless.

His "most likely" scenario is for gold to average $435/oz during 2005 and he puts a probability of 55% on that forecast.

In support, he cites the rising level of debt in the US, combined with the likely financial fallout from the "baby boomer" generation heading into retirement in the world's major economies.

Murenbeeld points out that the US budget deficit reached $430-billion at the end of June, from a surplus of $255-billion at the end of 2000 - but says the deficit is only part of the debt equation. Household debt and business-sector debt must be added. "Total US debt has risen to nearly 200% of GDP in recent quarters. The last time the debt level was this high was during the Great Depression in the 1930s, when GDP contracted sharply," he says.

"The debt level commenced rising significantly again in 2001 and its rise has been instrumental in keeping the US economy expanding. Note also that debt servicing for the household sector is near an all-time high as a percentage of disposable income - at these low interest rates!"

Murenbeeld points out the retiring boomers will need pension and health care services, which have been nationalised in most of the world's major economies, so governments will in effect have to pay the bills.

He says the options for dealing with this situation range from putting more financial responsibility on the household sector to governments printing more money.

Tightening up on households means less income for consumption, which means "sub-par economic growth". As Murenbeeld says, governments historically have printed money to deal with war debts and similar problems.

The resulting inflation reduces the real value of debt - and that is good for real assets such as gold. Murenbeeld concludes: "In short, we are bullish on gold because we are bearish on the dollar and the pressure of debt on monetary policy."

The most fascinating part of his presentation concerns what he dubs his "crazy graph".

That tracks the trend in the gold price against the Standard & Poor's index since 1870. It shows the three stock-market bubbles of the previous 100 years, and how gold has come back to parity with the S&P index in the aftermath of the previous two.

We are now in the aftermath of the third stock-market bubble. The chart shows that, for history to repeat itself, gold could go to $5,600/oz.

It's on the basis of this analysis that various radical gold forecasters are predicting that gold will exceed $3,000/oz.

Murenbeeld is far more restrained. "We are not forecasting gold to rise to $5,600. But the chart indicates that something fundamental happened to the gold price after the two previous bubbles. Is history to be repeated in a way we cannot foresee?"

He is not alone. The latest research report from JP Morgan shows the firm has switched its view on gold from "cautious" to "upbeat", citing the US debt situation as well as high oil prices, expected stronger jewellery demand in China and lower sales by central banks.

Murenbeeld raises the issue of some Asian central banks buying gold as part of a deliberate diversification policy, but comments: "There has been no strong indication to date that Japan, China or another Asian bank is planning to add gold to its reserves."

Financial Mail

rederob

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Sunday, October 10, 2004 - 09:30 am:

Gold has broken above its short term downtrend and is tracking oil higher.
Again, in AUD terms POG continues rangebound - presently $574.45 - due to AUD appreciation.
In euro terms POG is holding onto $340.
A week or two consolidating would now be handy before physical buying from India gets underway in November.
Very much setting POG up for US$450 before Xmas.
Strength in base metals underpinning silver's rise should ensure that POG downside is minimal, given POS/POG correlation.

archer

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Post Number: 314
Registered: 11-2002

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Sunday, October 10, 2004 - 07:27 pm:

China... and Gold
Richard Russell
Dow Theory Letters
October 11, 2004

Extracted from the Oct 9th, 2004 edition of Richard's Remarks

Periodically, I like to talk about the big picture. As I see it, the big picture, the fundamental picture, is that the world is producing too many goods. The entrance of China and India into the global economy has changed everything. China and India entering the world economy has meant that one-third of the world's population has suddenly become part of the global economy. And these people will work for fraction of what US and European workers will toil for. Furthermore, China has 15 million new people coming into the work force every year, and I believe India has the same. These people want to work, and they'll take any job and do it for less than we will here in the US. That's a huge problem, and it's one reason why jobs are being lost here. It's not the President's or anyone else's "fault," it's global capitalism in action. Period!

The phenomenon described above is basically deflationary. It means the price of merchandise and goods are being produced for less. And they are being sold for less. If you don't believe it, take a walk through your local Wal-Mart some day.

Ah, but there's an irony. China and to some extent India are becoming more prosperous. Their 2.5 trillion population want more of what we in the US and Europe have. In China alone, the need for basic commodities is huge -- basic commodities for China's manufacturing and for China's own use. And the result is almost a panic for basic materials -- and fuel.

Oil is now priced at record highs. Goldman Sachs recently raised its oil price forecast to an average of $50 for the rest of this year and $47 for 2005. The three-month copper price hit a high of $3.115 a tonne on the London Metals Exchange, highest since Jan. 1989. Aluminum hit a nine-year high this week, lead reached an 11-year peak and zink touched its highest mark in five years.

What's driving up the metals? In one word -- China. China is not only exporting huge quantities of goods, it is building its own infrastructure. New highways and new cities are going up all over China. China is in a frantic rush to become the next world power. China is trying to do in a few years what it has taken other nations decades to do.

Can China do it? They're doing it. During WW II thousands of Chinese men and women and children cracked rocks by hand to build Allied air fields. They built runways long enough to land the giant B-29s. They cracked rocks with hammers until their hands were bloody. Guys who flew in the Pacific will attest to that. No, I wouldn't underestimate what's happening in China today.

Where does that leave us and why? The US is now living on credit. The US is paying for its massive imports with credits and paper. And that is unsustainable. The big picture today is how long the dollar can hold up under these conditions. The game will go on as long as the rest of the world continue to accept dollars.

Today there are two viable alternatives to dollars. One is another form of central bank paper -- the euro. The other is the only time-honored form of wealth -- gold. Both the euro and gold are now moving higher.

The central banks believe they can control the world's monetary system. They print the money, and most of the world accepts it. But there's a small segment of the world that has learned the lessons of history. This is the segment that is now accumulating gold.

vermante

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Tuesday, October 12, 2004 - 09:40 am:

Gold prices slipped back as the market digested last week's run to six-week highs. But traders were still bullish about further gains, they said that a firmer euro and high oil prices could see prices make new highs this week beyond the 15 year peak of $430.50 achieved in January.(source -Macquarie news)

Vermante

lightsaber

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Post Number: 28
Registered: 08-2004

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Wednesday, October 13, 2004 - 01:46 am:

hi guys,
very interesting read.I'm wanting to go into gold and I have an account with CMC Group using CFDs.
Hopefully someone can clear up this question for me as I've had a big debate tonight with a couple of friends regarding it, if i buy say 20 lots of US Spot gold at hypothetically US$400/oz, if I use $US currency to pay for it (i.e. AUS currency converted to US currency), when it comes time to sell if the aussie currency has changed in price will this affect my return? (As the CMC software -MarketMaker- gives the option of buying in a currency of your choice.)
I think it will make a difference if I buy in Aussie currency, am I correct or wrong? The people I spoke to say it won't.

Back to the subject of Gold, any thoughts on www.forecasts.org ? Their predicate for gold is encouraging.
http://www.forecasts.org/gold.htm
except acccording to them Gold was supposed to hit US$598/oz last month :-O

Hopefully they're only out by a month ;)

rederob

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Wednesday, October 13, 2004 - 06:54 am:

lightsaber
POG is always denominated in US dollars.
My assumption is that the trading platform simply gives you the option of a purchase in your preferred currency - I may be wrong - so the actual amount paid would have to equal the USD price for the 20 lots.
Upon sale of the 20 lots, the USD denominated price would again be used (my assumption) and then converted to the amount of your chosen currency.
On this basis, if POG did not change but your chosen currency was up or down against the USD, you would have a similar percentage gain or loss.
I think what your friends were trying to tell you is that irrespective of how you try to think of the trade, the eventual outcome cannot change because POG is always USD denominated. So any purchase or sale decision will ultimately be reflected by the prevailing exchange rate against US currency.
In relation to POG forecasts, we can never know.
It's a bit brazen to forecast another $200 increase in POG before year's end when even tacking on another $20 is hard at the moment.
POG trend suggests a 10-20% increase year on year as a safer guide if you remain bullish.
good luck.

lightsaber

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Wednesday, October 13, 2004 - 08:50 am:

cheers rederrob, CMC group have confirmed this also.
And I was trying to convince my friends of this, they were certain that buying with either currency wouldnt make any difference to the overall picture - *edjiots*!

CMC group wrote:
"You can choose which Base Currency you want to use for your account. If your base currency is in AUD, then whenever you do a Gold vs USD trade, your P/L for the trade will be in USD until you request us to convert it back to AUD, before the conversion, it will be fluctuating with the FX rate. "

lightsaber

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Wednesday, October 13, 2004 - 01:04 pm:

Actually i'm the edjiot, buying with either currency wont make a difference. But the conversion back into aussie dollars will. So just like you said the purchase of US gold is subject to aussie exchange rates also, if you want it converted back at some stage.

rederob

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Tuesday, October 19, 2004 - 11:28 pm:

Just a brief spurt tonight for a dalliance at $420.
Please prescribe another blue pill for later in the week, doc:

rederob

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Wednesday, October 20, 2004 - 09:09 pm:

Well before New York opening it's not usual to get a big move north on spot gold.
Reason tonight is due to greenback weakness.....so far.
Could be enough momentum to push gold over $425 which will trigger some stops and ratchet POG higher still.
My view is that POG will not sustain a big push at present unless oil moves simultaneously strongly.
Come November and I reckon $450 will be well in range.

goldbug

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Post Number: 62
Registered: 02-2004

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Thursday, October 21, 2004 - 06:19 am:

You can now make a list as long as your arm to justify a much higher POG.
I won't list them here as I'm preaching to the converted.
Just to say its only a matter of time....

Goldbug

rederob

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Friday, October 22, 2004 - 08:03 pm:

goldbug
Can you shed any light:
Before yesterday's NY open gold was sold down heavily.
Again, as I type and 3 hours before open, gold is being sold down.
I would not normally notice this but for the fact POG is running in the same direction as the greenback, ie, also declining against the euro tonight.
Am I missing something?
Or are the GATA crew well and truly onto the central bankers game?

archer

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Friday, October 22, 2004 - 08:42 pm: