Gold...$300 II?

[TOM4CWB]

Cottonpicken...

I am seeing comments about Gold breaking through support... and interesting folks saying it could go down 50% from highs...

"Why Gold Could Fall 50% from
its Highs
By Dr. Steve Sjuggerud

Who's bearish on gold?

I dare you... Name one analyst who thinks gold could crash now.

What, you don't know any? That's what scares me... Everyone I know is bullish on gold... Everyone but my friend Jack Crooks.

I've mentioned Jack once or twice in DailyWealth as a true, successful contrarian. Over the summer, Jack was the only man I knew who was bullish on the U.S. dollar. He essentially said everything keeps getting worse, but the dollar has stopped going down, so it's bottomed. He nailed it. The Dollar Index soared from 72 when he wrote that to a peak around 88 a few months later..."

http://www.dailywealth.com/archive/2009/jan/2009_jan_13.asp

[liberty]

The fundamentals for gold continue to point to gains as opposed to losses.

The last time gold crashed in value was in the early 1980's. What caused that? With Paul Volker at the helm of the Fed, interest rates were raised sharply to combat inflation running at over 10%. Money supply growth slowed to a crawl, contributing to real deflation. Naturally, gold fell in value because inflation vanished as a threat.

As far as I can see, the Fed is doing exactly the opposite in terms of monetary policy compared to what Volker did in the early 80's. Interest rates have been slashed to unheard of levels while monetary growth is also running at levels that are unheard of.

The price collapse in commodities etc. is primarily due to deleveraging, not deflation, as large players in the market continue to unwind previous bets.

This deleveraging process is taking far longer than anyone anticipated, but it's important not to confuse this phenomenon with deflation, which is a contraction or slowdown in growth of the money supply.

[liberty]

Just to add something to the topic, I read this morning on Bloomberg that one of the major banks (I believe it was JP Morgan) is actually trying to find an oil tanker to rent to store all the oil it bought during the price runup last year.

This anecdote demonstrates the massive extent of the building of extensive inventories of high-priced commodities in the past couple of years. This is a temporary situation, however, and over the next year these inventories will be gradually sold off, even if sold at a huge loss. When that happens, look for tight supplies to spark a new inflationary cycle.

[agstar77]

Your comment on oil could just as well apply to fertilizer.

[liberty]

Yes. We've apparently got some big and expensive fertilizer inventories out there that need to be sold off before there's going to be a price rebound.

I want to correct my previous post; it was Morgan Stanley who's looking for the supertanker.

[cottonpicken]

It very well could drop in the short term,it had a very sharp drop in the late seventies before sky rocketing.

But i sure the hell wouldnt want to try and short something that could sky rocket and then try to cover.That is an unexeptable risk.

In the early eighties the debt of the us hit 1 trillion.It took two hundred years to get there.People were shocked and horrified of such a large number.

Now that is happening every few months.And people are standing around scratching their heads and talking about stimulus,to large to fail,the bottom is almost in,well see a recovery in late09,china needs us,bla,bla,bla.

If you think when all the baby boomers now were oldsters give me my old age check i diserve it and fix my hip for 50 grand while your at it, are going to be able to purchase more gold or even the same amount in the future well...... good luck to you.

Those programs are unfunded liabilities.

Were is government going to get the money?
An already over taxed society,that is going to have an even smaller tax base in the future?
Can you say d,d,d,deffficts?
Which is p,p,p,printing presses.

[Zaphod]

Does the physical use of gold get factored into prices? It's fine to talk about the macro situation, but there is also physical trade too. I read recently that 60-70% of annual gold production is used in making jewellery, with another big chunk used in electronics. I would think that demand would be drying up with the current recession. The question is whether the spec buying can counteract the lack of demand for physical. In that way, it's not that different than ag commodities. Or am I wrong?

[TOM4CWB]

Zapod,

You are just as right as C.P.

I like the part about the US $$$.

Logic and economic theory are not driving this market...

[sumdumguy]

Gold trade is mostly pure speculation. I, too believe that its glory days may be done. Can't imagine hat jewellery sales are too robust and production is up, so its stacking up like fertilizer. I haven't met anyone who can eat it or heat their house with it. History repeats itself and 1976-1978 isn't so long ago that I can't remember the precipitous fall in precious metals. May be wrong, but I keep seeing evidence in our economy of the saying, "every dog has his day".

[cottonpicken]

When confidence in a paper currency is lost,people turn to gold.

[boarderbloke]

i too am beginning to wonder about this long awaited gold rally...maybe just as i am waiting for the US$ to fall, maybe it's happened already(Oct-Nov 2007 CAN$)(Mar-Jul 2008 Euro) and maybe the gold rally too, has happened already(Mar 2008)

maybe, when US paper looks bad people will turn their money into wind turbines and solar panels?? Obama has a lot of momentum and optimism with him right now, both in the USA and Europe and i'm beginning to think i underestimated his power to silence all critics(including Republicans).
i'm starting to think that the US$ will stay strong(or as it is), as long as Obama stays strong and popular. As his popularity falls, so will the US$ people have bought into the idea of the gov't bailing out and spending trillions. they have not been able to accept that, most all they have(and we have), is a large part the result of a bubble(the standard of living they have has not been payed for) and now with their backs against the wall, with few options left, will accept any solution offered that will promise to keep the bubble inflated for the near term.

[boarderbloke]

All praise to THE ONE, the most hopeful and glorious OBAMA. Praise be to the all holy Meesiah

[jensend]

feeling better now?