Gold getting KILLED!!!!

[Diplomatbob]

Re: Gold getting KILLED!!!!

I suspect the U.S. will change its unfunded liabilities--i.e. cut expected future benefits. Easy to do if politically hard. The actual deficit is scary but as a country we've had worse. Good policy should be able to fix the issue over time.

But I am presuming we'll somehow get good policy, and there's a good chance we will not. Need better people to run for office.

[Verrocchio]

Re: Gold getting KILLED!!!!

The 2008 slump in gold prices followed the peak of the oil bubble in July 2008. Gold followed oil down as oil slumped dramatically. This preceded the dramatic stock market falls of October 2008.

As the stock market made new lows in March 2009, gold was rising back towards all time highs, while the US dollar strengthened due to deleveraging and risk aversion. In March 2009 both gold and the US dollar benefited from a "flight to safety".

When the current bear market rally ends and stock markets make new lows, we are likely to see a strong dollar AND strong gold as the "flight to safety" theme gets repeated.

Once the downdraft from the oil bubble collapse ended, the dollar and gold moved together inversely to the stock market - this is most obvious during the first half of 2009.

I would not expect to see gold move inversely to the US dollar until the balance of deflationary and inflationary forces tips in favour of inflation.

At present, collapsing credit (tens of trillions) still outweighs the trillions in bailout and stimulus spending, as very little of the bailout money has flowed through to the real economy.

I know EJ keeps saying we will switch over to "Poom" any minute now - but I really can't see this happening until mid 2010. While the Fed is certainly capable of monetarizing a $100 trillion dollar debt, they are in no hurry to print on this scale as they don't want to admit the magnitude of the disaster. I expect printing to gradually be expanded bit by bit, and a third and fourth and fifth stimulus package to come along, and I don't think the scale of the intervention will prompt a dollar devaluation until next year. In the short term, the intervention isn't dramatic enough to outweigh the deleveraging effects brought on by falling stock markets and home prices.

I'm thinking the markets will find their own bottom, 1932 style, some time next year, and only once the deleveraging is over will the demand for dollars fall to the point where currency devaluation and cost push inflation becomes a factor. At this point I expect stocks and gold to rise together while the dollar declines - after a bottom is reached and widely called inflationary expectations will take over.

I expect gold to go sideways over the next 12 months. It may rise as people seek a safe haven. Gold can do well in non-inflationary periods if there is a fear of financial and social collapse. The "gold is money" position.

I think the calls for a return to 700 gold ignore that fact that the oil bubble and oil slump of 2008 was a special factor which no longer applies.
I think $70 oil is being priced optimistically, and I expect oil to head back to $50 during the next leg down of the stock market. This may create a downdraft on gold, but nothing like last years oil/gold crash.

I think EJ is essentially right, but underestimating the depth and duration of the "ka" phase. I believe deleveraging will hold up the US dollar until the stockmarket makes a bottom, and I don't think any intervention will stop the market finding its own bottom. I expect the stock market to fall for another 12 months and make a deep bottom similar to 1932, as intervention will be too little too late due to the level of denial and self-deception in Washington and Wall Street.

thousandmilemargin, your message is highly plausible, from my POV.

Mega, this has become an interesting thread. Your practice of throwing raw meat into a pack of anxious, starving carnivores works every time!

Like ASH, I deplore the hostile comments that have crept into this thread. We would be far wiser to welcome challenges to the iTulip orthodoxy, for responding to "difficult" questions often deepens the community's understanding and conviction -- or perhaps reshapes it on the anvil of informed discussion and debate into a more realistic and, hopefully, profitable investment strategy.

FWIW, I support the suggestion to EJ for an up-to-date, concise statement of the iTulip position. A wiki is not the best tool for this. Better would be a sticky post at the head of the Ask EJ forum.

[tastymannatees]

Re: Gold getting KILLED!!!!

The reason you repeat yourself is because this blog has a poor index of main points or big calls. The standard forum list is hard to search through.

For example I would so something like this from your main page: to a page that lists itulip.com main story line, or ongoing thesis.

Introduction : Link to your article
Display summary of conclusions: max 500 characters.
Chapter one : Link to your article
Display summary of conclusions: max 500 characters.
Chapter Two : Link to your article
Display summary of conclusions: max 500 characters.
etc (with dates, authors, etc)

Then when an issue requires repeating you say : Goto chapter 7 and review itulips position. Or please read chapters 5 to 9...

Itulip has got so large, with so much info, a better wikki style book index is required.

Hey love the site, dont ban me !

LOL, I was thinking of making up my own Bar Chart/ Time line with notations of predicted events, turning points for quick reference. When I hit 50 it became hard to manage more than 2 or 3 big concepts in my poor aging brain at once.

Having to go back and refer / refresh my memory on things is a real waste of time

[big67]

Re: Gold getting KILLED!!!!

thousandmilemargin, your message is highly plausible, from my POV.

Mega, this has become an interesting thread. Your practice of throwing raw meat into a pack of anxious, starving carnivores works every time!

Like ASH, I deplore the hostile comments that have crept into this thread. We would be far wiser to welcome challenges to the iTulip orthodoxy, for responding to "difficult" questions often deepens the community's understanding and conviction -- or perhaps reshapes it on the anvil of informed discussion and debate into a more realistic and, hopefully, profitable investment strategy.

FWIW, I support the suggestion to EJ for an up-to-date, concise statement of the iTulip position. A wiki is not the best tool for this. Better would be a sticky post at the head of the Ask EJ forum.

And while we wait for EJ to come down from the mount with the golden tables, may we start building a molten calf... ?

[karim0028]

Re: Gold getting KILLED!!!!

FWIW, I support the suggestion to EJ for an up-to-date, concise statement of the iTulip position. A wiki is not the best tool for this. Better would be a sticky post at the head of the Ask EJ forum.

Sticky sounds good to me...

[fallout]

Re: Gold getting KILLED!!!!

The biggest case against gold in my opinion is it's popularity on internet forums, and various other places. That's not typical for a good investment. That's was what Hendry pointed out in the video. It can morph into a bubble as that is typical on the last leg when the masses get into something, that I see, but a good investment, in my opinion, no.

Just to point that ammunition (in the US, at least) is a popular investment on internet forums, has been for years, and it's up nearly 400% in the last few years alone. In fact, it has never fallen in price substantially in nearly 15 years (last time was when combloc surplus started flooding the market after the wall came down, a rather unusual event). So "grassroots popularity" isn't necessarily a "sell" signal.

[rjwjr]

Re: Gold getting KILLED!!!!

My impression is that money went into gold and Treasuries on the initial crash, when failure of the banking system seemed possible. Then, as fear of a systemic crash dissipated -- but stocks and commodity funds were still down -- gold sagged for awhile. That could have been partly because investors were withdrawing funds from commodity funds, which I think is ICM's point. On the other hand, it didn't dip that far, and it didn't stay down for very long -- for reasons I think gwynedd1 captured well.

In this discussion, I think we should define what a "fresh crash to the financial system" is. If it is a sell-off of the market and general commodities, but unaccompanied by fears of a systemic disaster, then possibly the price of gold might sag. (I have no opinion about price target in that scenario -- my eyes are on iTulip's long-term price target, and relationship to DJIA. Except, if this does happen and gold dips while the market revisits March, then I'll be cashing in my speculative shorts to buy gold or energy.) If it is a "crash" in the sense of a systemic crash, then obviously gold would rise sharply. In my opinion, the use of the phrase "to the financial system" means that EJ was speaking of fresh systemic worries. In other words, unless people are worried about the system, then gold trades sideways.

The "fears of a systemic disaster" may have dissipated, but I'm not convinced the possibility is any less. One case in point...

[rjwjr]

Re: Gold getting KILLED!!!!

wouldn't a significant, lesser event cause gold to go to the moon

for example: pakistan government falls, israeli strike on iran, british economy implodes in a similar fashion to iceland?

moreover, you really don't need a dollar collapse for gold to go to the moon; all you need is for the dollar to be de-throned as the reserve currency of the day and imho that is looking increasingly as an inevitable event...

all you have to do is to carefully read what is being reported on a daily basis now and fit the pieces into this puzzle:

http://www.bloomberg.com/apps/news?p...d=aqA9QhRSNeqM

AG,

I didn't see much discussion on your points here, but I think you bring-up a good point. Gold will see a nice upward pop in price if one of these types of surprise negative events occurs...and it just seems like the global environment is ripe for something negative to happen at any moment.

[ThePythonicCow]

Re: Gold getting KILLED!!!!

The "fears of a systemic disaster" may have dissipated, but I'm not convinced the possibility is any less. One case in point...

I don't see where it will be such a big event if this FDIC Fund goes negative.

Rather like a former lady friend of mine, once that credit card is maxed out, don't they just switch to another?

In other words, doesn't the FDIC have access to additional Treasury or Fed (nor sure which; I tend to confuse the two) funds as necessary?

[thriftyandboringinohio]

Re: Gold getting KILLED!!!!

I like gold and don't care if it drops to $500.
If the worst happens economically in the US then the only way to get through the storm and come out the other side with any of my wealth left in my hand is with gold.
It'll preserve against hyperinflation; survive a wipe out of paper assets; I can carry my remaining life savings hidden in a backpack (as opposed to a Picasso painting or farmland in Kansas or ammunition); and I can trade it for land or equipment anywhere in the world on any given day.

I'm using gold as 3 things simultaneously:
- an insurance policy against further financial disaster that will preserve a good chunk of my wealth
- a high probability, modest gain investment in real terms, more than enough to cover the costs of purchase and sale
- a long-shot bet that a gold mania could pay me a windfall

Good life rafts aren't cheap, but no one who actually used theirs bitched about the price.
My gold is my zero-cost life raft, my safe 2% investment, and my lottery tickets all combined into one handy small package.
Of course, I listened to EJ back in about 2000 so I bought most of mine under $400/oz.:cool:
Buy-low-sell-high is much easier when you buy really low - it becomes "buy-really-low-sell-whenever"

[ASH]

Re: Gold getting KILLED!!!!

The "fears of a systemic disaster" may have dissipated, but I'm not convinced the possibility is any less. One case in point...

FRED has clarified that my interpretation of what EJ wrote is incorrect. Ah well, it won't be the first time I've imagined a nuance where none was intended.

That said, I personally do see a distinction between a crash of the financial system versus a crash of the financial markets, and I think the price of gold is apt to behave differently in the two cases. (I gather from FRED's clarification that iTulip thinks a fall in financial markets is likely to chase money into gold and Treasuries, even if the whiff of institutional/systemic failure isn't in the air. I think gold might dip and later recover under such circumstances, but that the dip will be to a degree and on a time scale that doesn't matter to my non-trader self.) If the new "system" is government-sponsored reflation, then a crash of that system would be something like the balance of payments crisis or capital flight which iTulip says could happen, and which would impair the government's ability to apply fiscal stimulus. On the other hand, the end of the first bounce doesn't change the system, even if it will drag markets back down. Both might happen, but I think falling markets at the end of the first bounce is far more predictable (hell, it is probably upon us) than the exact timing of the next systemic crisis. I guess we'll witness the impact on gold.

I'm right there with you as regards the potential for a fresh crisis, although I don't think it will look like the last one. I'm less worried about banks failing, and more worried about the government having to cut up its credit cards. At this point, however, it's not obvious to me that the next systemic crisis will hit in the next six months. (And it will become obvious to me right after EJ tells me so. )

[gwynedd1]

Re: Gold getting KILLED!!!!

The 2008 slump in gold prices followed the peak of the oil bubble in July 2008. Gold followed oil down as oil slumped dramatically. This preceded the dramatic stock market falls of October 2008.

As the stock market made new lows in March 2009, gold was rising back towards all time highs, while the US dollar strengthened due to deleveraging and risk aversion. In March 2009 both gold and the US dollar benefited from a "flight to safety".

When the current bear market rally ends and stock markets make new lows, we are likely to see a strong dollar AND strong gold as the "flight to safety" theme gets repeated.

Once the downdraft from the oil bubble collapse ended, the dollar and gold moved together inversely to the stock market - this is most obvious during the first half of 2009.

I would not expect to see gold move inversely to the US dollar until the balance of deflationary and inflationary forces tips in favour of inflation.

At present, collapsing credit (tens of trillions) still outweighs the trillions in bailout and stimulus spending, as very little of the bailout money has flowed through to the real economy.

I know EJ keeps saying we will switch over to "Poom" any minute now - but I really can't see this happening until mid 2010. While the Fed is certainly capable of monetarizing a $100 trillion dollar debt, they are in no hurry to print on this scale as they don't want to admit the magnitude of the disaster. I expect printing to gradually be expanded bit by bit, and a third and fourth and fifth stimulus package to come along, and I don't think the scale of the intervention will prompt a dollar devaluation until next year. In the short term, the intervention isn't dramatic enough to outweigh the deleveraging effects brought on by falling stock markets and home prices.

I'm thinking the markets will find their own bottom, 1932 style, some time next year, and only once the deleveraging is over will the demand for dollars fall to the point where currency devaluation and cost push inflation becomes a factor. At this point I expect stocks and gold to rise together while the dollar declines - after a bottom is reached and widely called inflationary expectations will take over.

I expect gold to go sideways over the next 12 months. It may rise as people seek a safe haven. Gold can do well in non-inflationary periods if there is a fear of financial and social collapse. The "gold is money" position.

I think the calls for a return to 700 gold ignore that fact that the oil bubble and oil slump of 2008 was a special factor which no longer applies.
I think $70 oil is being priced optimistically, and I expect oil to head back to $50 during the next leg down of the stock market. This may create a downdraft on gold, but nothing like last years oil/gold crash.

I think EJ is essentially right, but underestimating the depth and duration of the "ka" phase. I believe deleveraging will hold up the US dollar until the stockmarket makes a bottom, and I don't think any intervention will stop the market finding its own bottom. I expect the stock market to fall for another 12 months and make a deep bottom similar to 1932, as intervention will be too little too late due to the level of denial and self-deception in Washington and Wall Street.

Hi thousandmilemargin, This has been my trouble. The Fed balance sheet is rather meaningless to me. Were we near a point where the primary reserves where lacking to prevent consumer and business credit? To see the big poom I need to see credit not only stop collapsing but move well beyond moderate growth.

http://www.federalreserve.gov/releases/g19/Current/

This number includes the refinancing boom with some taking cash out. This is the money that actually circulates. Since real estate is the main credit producing entity we have, what will replace it since I see no recovery? How many baby boomers do I need to run into who want to sell their big expensive houses which will continue to pound that sector and shrink the credit that goes with it?

This includes me since I rolled my expenses into the new loan. However I have since leveled that off and then some. The other debt I added was energy saving windows sitting on 9 months at 0% and this was because of the tax credit. By early next year that will be gone. In other words if there are more people like me credit is in for a contraction as we continue to see. As far as the itulip position that we were due for a serious crash they were dead on and had the facts. However the following poom is a political estimation of how our government will react at least in part. They can react like Japan.

Now it is true that we are a debtor nation but that does not make life easy for creditor nations when there is a surplus of manufactured goods. Post WWII gave the US a virtual monopoly and then life is good for a manufacturer. Now Europe has recovered and all of Asia now competes for industrial capacity. Even if the US is not a good customer, too much capacity will find itself without pricing power. They don't hold all the cards either as we see Japan scrambling around finding that producing something no one is buying is little better. Is it not axiomatic that if the US, the largest consumer in the world by far is pulling out that there will be a massive glut for years to come? The only thing I could see as being an issue is in oil if the rest of the world can somehow retool itself away from a US centric world economy but that will take years.

So I believe the political option is open to allow years of stagnation. They may decide to risk inflation because that does have a western historical precedent but then we have seen a lot of new things we never thought were possible in American institutions. If I see consumer credit growing again then I may change my position but it has not even leveled off.

[FRED]

Re: Gold getting KILLED!!!!

The 2008 slump in gold prices followed the peak of the oil bubble in July 2008. Gold followed oil down as oil slumped dramatically. This preceded the dramatic stock market falls of October 2008.

As the stock market made new lows in March 2009, gold was rising back towards all time highs, while the US dollar strengthened due to deleveraging and risk aversion. In March 2009 both gold and the US dollar benefited from a "flight to safety".

When the current bear market rally ends and stock markets make new lows, we are likely to see a strong dollar AND strong gold as the "flight to safety" theme gets repeated.

Once the downdraft from the oil bubble collapse ended, the dollar and gold moved together inversely to the stock market - this is most obvious during the first half of 2009.

I would not expect to see gold move inversely to the US dollar until the balance of deflationary and inflationary forces tips in favour of inflation.

At present, collapsing credit (tens of trillions) still outweighs the trillions in bailout and stimulus spending, as very little of the bailout money has flowed through to the real economy.

I know EJ keeps saying we will switch over to "Poom" any minute now - but I really can't see this happening until mid 2010. While the Fed is certainly capable of monetarizing a $100 trillion dollar debt, they are in no hurry to print on this scale as they don't want to admit the magnitude of the disaster. I expect printing to gradually be expanded bit by bit, and a third and fourth and fifth stimulus package to come along, and I don't think the scale of the intervention will prompt a dollar devaluation until next year. In the short term, the intervention isn't dramatic enough to outweigh the deleveraging effects brought on by falling stock markets and home prices.

I'm thinking the markets will find their own bottom, 1932 style, some time next year, and only once the deleveraging is over will the demand for dollars fall to the point where currency devaluation and cost push inflation becomes a factor. At this point I expect stocks and gold to rise together while the dollar declines - after a bottom is reached and widely called inflationary expectations will take over.

I expect gold to go sideways over the next 12 months. It may rise as people seek a safe haven. Gold can do well in non-inflationary periods if there is a fear of financial and social collapse. The "gold is money" position.

I think the calls for a return to 700 gold ignore that fact that the oil bubble and oil slump of 2008 was a special factor which no longer applies.
I think $70 oil is being priced optimistically, and I expect oil to head back to $50 during the next leg down of the stock market. This may create a downdraft on gold, but nothing like last years oil/gold crash.

I think EJ is essentially right, but underestimating the depth and duration of the "ka" phase. I believe deleveraging will hold up the US dollar until the stockmarket makes a bottom, and I don't think any intervention will stop the market finding its own bottom. I expect the stock market to fall for another 12 months and make a deep bottom similar to 1932, as intervention will be too little too late due to the level of denial and self-deception in Washington and Wall Street.

You may want to preface your summary of iTulip positions with a phrase like, "As a non-subscriber who does not have access to iTulip analysis and statements of position, I believe EJ expects "poom" any day now..."

Our position is that gold trades sideways in 2008 as in 2006, inflation appears late Q4 2009 to Q1 2010, and we have no estimate of when a balance of payment crisis and "poom" event may occur as that is a poliical not a market event.

[Mega]

Re: Gold getting KILLED!!!!

You may want to preface your summary of iTulip positions with a phrase like, "As a non-subscriber who does not have access to iTulip analysis and statements of position, I believe EJ expects "poom" any day now..."

Our position is that gold trades sideways in 2008 as in 2006, inflation appears late Q4 2009 to Q1 2010, and we have no estimate of when a balance of payment crisis and "poom" event may occur as that is a poliical not a market event.

Copy that Fred
Have you noticed how More & more both British & American camps are talking about "Price stablisation" of Oil Etc...........in other words Price controls?
Mike

[icm63]

Re: Gold getting KILLED!!!!

Our position is that gold trades sideways in 2008 as in 2006

I suggest if the reader is new to the gold bull and the they want to get on the gold bull run, then I would amend the above statement to say

...'I expect gold to not to make new highs in 2008 (or minor at most), but I do expect the large holders of gold to force a shakeout of the weak bull hands so that they can buy more gold at cheaper prices just prior the next major push up. This means a plunge down to 600 is not to be unexpected.'... Bulls know they can use bad news to shakeout those that having been buying between 750 and 1000 very easily. Gold is a crowded trade. So be careful grass hopper.