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     holycow
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Username: holycow
Post Number: 374
Registered: 08-2004Rating: N/A
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| | Tuesday, November 16, 2004 - 06:44 pm: |  
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China... and Gold
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 zinc touched its highest mark in five years.
What's driving up the oil and 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.(Bingo! Did I hear 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.(the WINNER?)
Richard Russell
Dow Theory Letters
dated October 11 2004
HC
"... if you've got a chart, I have an opinion!"
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holycow
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Username: holycow
Post Number: 579
Registered: 08-2004Rating: N/A
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| | Monday, December 13, 2004 - 12:33 pm: |
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How about gold and silver? Gold is cash, but over the last few days gold is being sold as a commodity. This is stupid, but it's happening. I never argue with the markets, even when I believe they're being irrational and emotional.
Silver may be a different story. Silver is a chameleon. In an inflation, silver becomes a "precious metal," and a monetary metal, and silver goes up with inflation. But in a deflationary situation silver is viewed as an industrial metal. In a deflationary environment, silver is not, as in the case of gold, viewed as money. If we're going into a deflationary economic collapse, holding gold doesn't worry me. But holding silver would worry me.
- Richard Russell, April 2004 discussing the possibility of the US economy falling into a deflationary spiral.
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HC
"... if you've got a chart, I have an opinion!"
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holycow
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Username: holycow
Post Number: 650
Registered: 08-2004Rating: N/A
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| | Friday, January 07, 2005 - 11:55 am: |
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XAU
1) this not my chart, it looks ominous with the H&S looming at large
HC
"... if you've got a chart, I have an opinion!"
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holycow
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Username: holycow
Post Number: 816
Registered: 08-2004Rating: N/A
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| | Monday, February 07, 2005 - 03:47 pm: |
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Thought the following sector indices "revealing" - in the sea of green, one red stand out! The Phlx gold/silver index is in green probably due to silver and not gold?
HC
"... if you've got a chart, I have an opinion!"
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smallworld
Member
Username: smallworld
Post Number: 146
Registered: 01-2004Rating: N/A
Votes: 0
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| | Monday, February 07, 2005 - 11:36 pm: |
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HC,
Two words interest me a great deal.
One is the word deflation that you use, and the order is the word that the Fed Chairman used "Disinflation". Having grown up in the 70s, I know the impact of inflation pretty well, so what is the impact of disinflation and deflation?
The following is one of the article I found on the web.
http://www.bos.frb.org/economic/nerr/rr1997/winter/hell97_1.htm
the financial world has been saying disinflation has changed the way the global market works now, or in my own terms intermarket relationships.
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holycow
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Username: holycow
Post Number: 820
Registered: 08-2004Rating: N/A
Votes: 0
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| | Tuesday, February 08, 2005 - 09:05 am: |
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SW,
This kind of reminded me of information, misinformation and disinformation... I'll take that disinflation means "unintentional inflation"?  Sorry, I have no clue on this - I'll take them to mean the same thing!
Regarding inflation and its impact - I remember on the document provided by the people who sold me their house - they were paying an interest rate of 18% or higher (from memory). If you were to take a linear compounding, their total interest payment would almost equal to the capital borrowed in 5 years. I don't think it's something any borrower can sustain in a long period.
The issue of deflation frankly I didn't and won't buy it from Greenspan (sounded arrogant here), when he first mentioned that about last year or the year before. In my view, the productivity gain and deflation the US has experienced/are experiencing are a direct result of China's contribution - the Chinese has so drastically reduced the cost of production of so many imports (finished goods, parts, components, etc) to the USA that the cost saving get filtered down to the manufacturers and consumers in general. On top of that because of the Chinese low cost pressure, all the other competing industries/countries like Korea, Japan, etc that provide feeder products/services to the USA were forced to clamp down their cost or face losing trades, this again helps the productivity gain and deflation cycle.
I believe the deflation threat will go away once the "input" cost of all these imports into the USA increases due to - for example, the increasing prosperity of the Chinese people which will raise the labour cost, the increase of commodity cost (look at energy, coal and iron and other metals), the increase cost of doing business (read interest rate) - I really don't think deflation is a real issue!
It's the inflation Mr.Greenspan (who will turn blue very soon if he still sits on his arse) that should focus in. And right now, I really don't think he has many options. I think he is a sitting duck and hope that his age will not fail him and the whole of the USA... and the world!
Cheers.
ps: Oops! Deflation's primary impact I believe would mean a contraction of economy where people/business become so pessimistic (just imagine you build a car at $1000 and sell it for $500, and then $200 3 months later) in their outlook they begin to conserve their capital and cut back spending, etc which will cause a downward spiral to all the economic activities until... well we get a big depression like the 30's - where high unemployment and poverty will be the norm (can't imagine all of us lining up for some free "soup" handout...shuddering thought!).
But again in my simplistic view I think deflation goes against our human spirit - we tend to be optimist and live on hope, so I doubt deflation will be a threat in this modern era.
HC
"... if you've got a chart, I have an opinion!"
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smallworld
Member
Username: smallworld
Post Number: 147
Registered: 01-2004Rating: N/A
Votes: 0
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| | Tuesday, February 08, 2005 - 09:58 am: |
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HC
I dont think I knew the word existed when I was growing up. Disinflation, from what I found out so far, is dis (as in discourage, disable) + inflation, which means striping inflation out of economy. if an economy has a nominal inflation of 3.5%, and now for a whole hosts of reasons, inflationary costs rises are not passed on to the end consumers, for example, importers absorb the cost of currency fall and do not pass on the increase of cost, or the import of china has forced prices as a whole steady, and in some cases, come down. So in this sense, Disinflation and Deflation is different. Understanding this helps me to understand the current intermarket relationship.
the link my posted attempts to highlight the cost of disinflation....... and is interesting read. Essentially this explains why stock and bond stop trending together between 2000 and 2003. If disinflation is no longer a problem, then bond and stock will trending together again, then bond becomes a useful indicator to give insight to the stock market.....
SW
(Message edited by smallworld on February 08, 2005)
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holycow
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Username: holycow
Post Number: 821
Registered: 08-2004Rating: N/A
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| | Tuesday, February 08, 2005 - 10:42 am: |
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SW,
I will reread your link again when I have time. Thanks for that.
I believe the bond's trend has more to do with FED's interest rate than anything else. My "thesis" was back in 02/03 the market was kind of assumed there wouldn't be any major interest rate movement and hence has discounted its impact which effectively leaving the bond "directionless". Wild guess here but will read your link again.
HC
"... if you've got a chart, I have an opinion!"
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smallworld
Member
Username: smallworld
Post Number: 152
Registered: 01-2004Rating: N/A
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| | Wednesday, February 09, 2005 - 10:33 pm: |
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Divergence between Gold price GC and Gold/Silver Stock index XAU. Gold stocks could not make a new high when gold price made a new high in Dec.
Gold might have topped.
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holycow
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Username: holycow
Post Number: 2115
Registered: 08-2004Rating: N/A
Votes: 0
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| | Sunday, November 20, 2005 - 12:09 pm: |
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Gold Comex Weekly
1) after breaking out of the tringle, the gold future has reached its target and is now sitting right under the upper channel line; if (IF!) gold is able to break out of the upper channel, you are looking at 560 at a minimum I think - so pray hard for that to happen; the bullish channel is very encouraging which in a way is saying gold probably has a lot more upward momentum;
2) the alternative message is this - the gold investors are bearish on the equity market, US$, economy and most other alternative investment instruments...
HC
"... if you've got a chart, I have an opinion!"
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holycow
Member
Username: holycow
Post Number: 2137
Registered: 08-2004Rating: N/A
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| | Wednesday, November 23, 2005 - 08:30 am: |
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Gold futures near $500 an ounce
Retracement possible before technical hurdle breached
By Ciara Linnane, MarketWatch
Last Update: 4:01 PM ET Nov. 22, 2005
NEW YORK (MarketWatch) -- Gold futures continued their bull run Tuesday, bringing the front-month contract to within $4 of the key $500 an ounce level, on continued robust physical demand and fears of inflation.
Gold for December delivery touched $495.90 overnight before pulling back. The contract closed up $3.40 at $492.90 an ounce.
"The target remains the magical $500 number, but we might see some retracement before that number is reached," said Alan Plaugmann, sales trader at Saxo Bank.
The precious-metals rally is being driven by institutional and hedge-fund buying, although volume can be expected to thin in the run-up to this week's Thanksgiving holiday, he added.
"This may entice some selling pressure to precious metals, as traders look to square their positions before the weekend," said Plaugmann.
December breakout
Peter Grandich, editor of the Grandich Letter, agreed, saying that the market may have to wait till December for the next big break higher.
But the combination of strong physical demand from India and China, buying by central banks (notably the Russian central bank) and a technical breakout "has given gold a clear path to $500," he said.
Gold gained almost $17 an ounce last week, bringing it to levels not seen since late 1987, and many analysts expect it to break through $500 in the near term. The last time gold traded that high was in December 1987.
The rise has come even as the dollar has rallied, reflecting investor worry about inflation. The Federal Reserve repeatedly has expressed its concern that inflationary pressures are building in the economy and has stuck with a steady course of quarter-percentage point rate hikes to fight it.
The Fed's focus on inflation has fueled the gold rally, although the concerns may be overdone, according to Thomson First Call research analyst David Dropsey.
"There's a pretty big premium built in compared with where inflation rates actually are," he said. "If we don't see signs of inflation, that could start to lose its effect and put real pressure on the price of gold."
What's more, the rally may be finding support in concerns that the U.S. real-estate market is starting to cool, added Dropsey.
"It could be that the disconnect between gold and the dollar is because of people getting out of major real-estate investments and using gold as a security investment before working out which is the next growth asset class," he said.
HC
"... if you've got a chart, I have an opinion!"
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holycow
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Username: holycow
Post Number: 2192
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| | Thursday, December 01, 2005 - 01:03 pm: | | | |
