Three time bombs: Gold bullish or bearish?

[icm63]

TimeBomb1- American consumer collapses further: Job losses creates fear that attracts further conservative spending habits, plus the second wave of massive mortgage resets coming 2010/11 (Option ARMs, Alt A).

TimeBomb2- Chinese Economic Lies: China is in recession if the GDP formula used is the even close to USA/Europe GDP calculation, yet they claim 10% forecast GDP for 2010. A minimum of 9% GDP is required to get the new coming of age workers a job (approx 24 million persons a year). China's lack of disclosure of employment numbers, debts, and other economic measures delays the but does not stop the eventually reality shock of the true situation.

TimeBomb3- Too much $USD: Collapse of $USD. China holds $2T of $USD, moving from this position to GOLD may cause a run on the dollar.

BUT as we have seen with (1) and (2) these actions are deflationary. Causing a flight to safety to USA treasuries (NOTE: This will allow USA to sell its $2T debt issuance, so maybe a shock will be engineered by Goldmansachs, who knows!). This will see a bid for the dollar and cause profit taking in gold. So the way I see it the immediate shock of bad news is bearish for gold, but on recovery gold would be bullish. So I cant see China getting too keen to get out of $USD just yet when they know the negative news flow is not over yet.

[grapejelly]

Re: Three time bombs: Gold bullish or bearish?

None of what you write about is deflationary.

Quite the opposite.

The reaction of the gubmints is to print, print, print. That will be highly inflationary.

#3 - well, it is not to China's advantage to tank the dollar. All other fiat currencies are perhaps just as bad or worse than the US$...

I think we are in for another "deflationary scare", deleveraging, with the USD strengthening, commodities falling all except gold...and stocks falling.

Gold will go higher relative to commodities and silver.

Then, at some point, perhaps next year, gold will start taking off again against the USD and all other currencies and that is when I think we will see gold in the $1000 to $2000 range and the next upleg of the bull market in gold and silver producers that started in 2000.

[radon]

Re: Three time bombs: Gold bullish or bearish?

TimeBomb1- American consumer collapses further: Job losses creates fear that attracts further conservative spending habits, plus the second wave of massive mortgage resets coming 2010/11 (Option ARMs, Alt A).

TimeBomb2- Chinese Economic Lies: China is in recession if the GDP formula used is the even close to USA/Europe GDP calculation, yet they claim 10% forecast GDP for 2010. A minimum of 9% GDP is required to get the new coming of age workers a job (approx 24 million persons a year). China's lack of disclosure of employment numbers, debts, and other economic measures delays the but does not stop the eventually reality shock of the true situation.

TimeBomb3- Too much $USD: Collapse of $USD. China holds $2T of $USD, moving from this position to GOLD may cause a run on the dollar.

BUT as we have seen with (1) and (2) these actions are deflationary. Causing a flight to safety to USA treasuries (NOTE: This will allow USA to sell its $2T debt issuance, so maybe a shock will be engineered by Goldmansachs, who knows!). This will see a bid for the dollar and cause profit taking in gold. So the way I see it the immediate shock of bad news is bearish for gold, but on recovery gold would be bullish. So I cant see China getting too keen to get out of $USD just yet when they know the negative news flow is not over yet.

1 is probably a given. Consumers are already entrenched and becoming more so. Banks are limiting their risk by reducing credit limits or changing more interest. None of this spells credit expansion anytime soon. Maybe the government will get "creative".

2 is worrisome. All official numbers coming from China are suspect imo.

I really cant see China getting out of the dollar at all. They risk losing their investment by destroying the market. We might be in an economic standoff but if they shoot the hostage they lose all their leverage. Wouldn't they want to stretch this out as long as possible and get the best ransom.

They may accidentally cause a run on the dollar but I can't imagine they would think it is in their interest to do so as a matter of policy.

[icm63]

Re: Three time bombs: Gold bullish or bearish?

Then, at some point, perhaps next year, gold will start taking off again against the USD and all other currencies and that is when I think we will see gold in the $1000 to $2000 range and the next upleg of the bull market in gold and silver producers that started in 2000.

True crises does create more reason to PRINT money, but I agree with you on the above. This is most likely the reason why $1000 gold is not happening. With the USA fall (Sept/Oct) coming up why would GOLD bulls risk more funds to go long, when they can cause a shakeout of gold with more bad news and buy the stuff at cheaper rates.

[Starving Steve]

Re: Three time bombs: Gold bullish or bearish?

None of what you write about is deflationary.

Quite the opposite.

The reaction of the gubmints is to print, print, print. That will be highly inflationary.

#3 - well, it is not to China's advantage to tank the dollar. All other fiat currencies are perhaps just as bad or worse than the US$...

I think we are in for another "deflationary scare", deleveraging, with the USD strengthening, commodities falling all except gold...and stocks falling.

Gold will go higher relative to commodities and silver.

Then, at some point, perhaps next year, gold will start taking off again against the USD and all other currencies and that is when I think we will see gold in the $1000 to $2000 range and the next upleg of the bull market in gold and silver producers that started in 2000.

The one thing I don't like about gold right now: its high price. $35 per oz. gold is now worth $930 U.S. That is a bubble if there ever was one.

Show me how many things in the cost of living in America that have gone up by 26 times since 1971? (Even California real estate is in major correction now.)

Yes, a burst of hyper-inflation in America would send gold up even more, but where is that hyper-inflation? Yes, with Bernanke, we have to beware of hyper-inflation, but so far, so good: no inflation. Yes, things may change if the economy recovers, but economic recovery is nowhere in sight now.

[icm63]

Re: Three time bombs: Gold bullish or bearish?

where is that hyper-inflation

You can not have hyper inflation is a senior credit economy: Quote Bob Hoye here: http://www.itulip.com/forums/showpos...&postcount=103

Inflation (POOM) is PENDING !

[pwcmba]

Re: Three time bombs: Gold bullish or bearish?

The one thing I don't like about gold right now: its high price. $35 per oz. gold is now worth $930 U.S. That is a bubble if there ever was one.

Show me how many things in the cost of living in America that have gone up by 26 times since 1971? (Even California real estate is in major correction now.)

Yes, a burst of hyper-inflation in America would send gold up even more, but where is that hyper-inflation? Yes, with Bernanke, we have to beware of hyper-inflation, but so far, so good: no inflation. Yes, things may change if the economy recovers, but economic recovery is nowhere in sight now.

I think you got that date wrong. Gold was fixed at $35 in 1933!

http://en.wikipedia.org/wiki/Executive_Order_6102

"The price of gold from the treasury for international transactions was thereafter raised to $35 an ounce;"

Using the correct date of '33 one can see that gold is not in a bubble by a long shot. Almost anything you can name is up at least 26 times since 1933.