Hawk talk going to lead to a drop in gold?

[blazespinnaker]

Looks like Bernanke, Trichet, et al. are starting to get on the hawk bandwagon.

If we have a globally concentrated effort to stem inflation, we may see precipitous drops in gold prices.

http://www.bloomberg.com/apps/news?p...Olk&refer=home

[metalman]

Re: Hawk talk going to lead to a drop in gold?

Looks like Bernanke, Trichet, et al. are starting to get on the hawk bandwagon.

If we have a globally concentrated effort to stem inflation, we may see precipitous drops in gold prices.

http://www.bloomberg.com/apps/news?p...Olk&refer=home

don't ignore the conundrum... central banks can talk, talk, talk. until they do, do, do and show they plan to keep at it, inflation expectations will keep rising and the funds will keep buying. meanwhile, we're top of the 3rd inning of the credit crunch and debt deflation. how can they raise rates? all they can do is talk about it. even the msm is reporting Subprime debacle may spark 2-year credit recession. show me a time when the fed raised rates when credit was contracting.

[WDCRob]

Re: Hawk talk going to lead to a drop in gold?

It is a good strategy though... just about the only one they've got.

Already proved in need of the little blue pills as far as inflation goes, they've changed their talk, talk, talk to "inflation expectations." Which seems to be working for now, and at least delaying the moment of reckoning.

In Inflation II, EJ's saying they've been able to delay due to the general slowness of a housing market correction, but that the 'conundrum' can't really be avoided. Eventually it'll be raise rates to fight inflation, or cut them to fight recession. EJ's money's still on cuts.

Can anyone see a way out if they can punt this down the road far enough?

[c1ue]

Re: Hawk talk going to lead to a drop in gold?

Seems very straightforward to me:

1) Scare everyone with inflation caused by dollar devaluation.

Gas prices shoot through the roof, car sales plunge, etc.

2) Then suddenly say: we've fixed the problem. No more dollar devaluation.

Gas prices go from $4 to $3.75. People cheer as 'we're going the right direction'

3) Elections in November

4) Resume dollar devaluation now that the 'inflation issue' and 'economy issue' are neutralized for the election.

Of course, if housing takes the next leg down during the summer, all bets are off.:confused:

Although I'd not be even slightly surprised if the next series of 'good news' is comprised of banks raising capital (and diluting shareholders)

[*T*]

Re: Hawk talk going to lead to a drop in gold?

Time to double your bets. What an opportunity to go against the street.

[Guest]

Re: Hawk talk going to lead to a drop in gold?

Time to double your bets. What an opportunity to go against the street.

Zactly right. And don't overlook that the dollar can even be rising, vs. the Euro, or whatever, and we can enter a new phase where the PM's remain buoyant and continue to rise against all currencies. In the late 1970's the recipe was "rising rates and rising gold". The only ingredient that is essential is that the rate rises consistently and significantly lag the real inflation rate. If we accept Shadowstats inflation numbers, it's clear that rates can be raised a long way and still severely lag the real inflation rate.

All this fearsome talk about how a single rate hike will kill gold is ahistorical.

[Thailandnotes]

Re: Hawk talk going to lead to a drop in gold?

"Of course, if housing takes the next leg down during the summer, all bets are off."

1 in 10 Americans have missed at least one mortgage payment.
http://www.nytimes.com/2008/06/06/bu...rtgage.html?hp

[FRED]

Re: Hawk talk going to lead to a drop in gold?

"Of course, if housing takes the next leg down during the summer, all bets are off."

1 in 10 Americans have missed at least one mortgage payment.
http://www.nytimes.com/2008/06/06/bu...rtgage.html?hp

According to the Fed, miss one mortgage payment and the borrower is technically in default, although few banks proceed against a borrower who has only missed one payment. Still, the number of mortgage holders who have missed a payment in the last 12 months is a reliable measure of distress.

According to the New York Fed's web site:

In California:

• 52% of sub-prime borrowers missed one payment in the past 12 months: 1 out of 2
• 22% of Alt-A borrowers missed one payment in the past 12 months: nearly 1 out of 4

[Mega]

Re: Hawk talk going to lead to a drop in gold?

Luke
You still long Gold?
Schiff is saying buy more NOW, what's your thoughts?
Cheers
Mike

[Guest]

Re: Hawk talk going to lead to a drop in gold?

Luke - You still long Gold? Schiff is saying buy more NOW, what's your thoughts? Cheers, Mike

Mike, you are an iTulip premium member. Janszen will give the signal when the holding looks iffy. He hasn't traded gold once yet since 2001, so you won't likely get a wrong signal from Janszen when holding it becomes less clearly indicated.

Also, you can just go to Shadowstats, look up the real US inflation rate, then look at the current rates set by the Fed. If you see a "big gap" between them persisting, disregard all the noise and angst from the markets and stay long the metal.

There are plenty of savvy people around this community also who are heavily long gold and the metals. The cumulative sum of their instincts is also a solid input. They will be speaking out if and when the holding looks really iffy.

For myself, I am not even looking much at Shadowstats numbers. I think what's clearly going to develop in petroleum in the next ten years is so wildly inflationary that currencies will be acting as "shock absorbers" for this event for many a year to come. That looks like "inflation, as far as the eye can see", as real oil prices climb to $175.00 to $200.00 a barrel, and that's maybe only 2-3 years forward from now. No bubble there a-tall .

I think anyone looking to lighten up on gold in that kind of environment is making the wrong move. And what is there left to doubt, about peak cheap oil? Ready or not - here it comes. Gold at $800-$860 seems a buy right now. I wouldn't mind having a vacant lot somewhere to stash 250 odd barrels of light sweet crude either (about $30K's worth) as a nice "portfolio diversifier".

[grapejelly]

Re: Hawk talk going to lead to a drop in gold?

gold is something you sit tight on. It will explode in a year or 3. It has done quite well up until now. It is real money. It is a screaming buy and so are good junior mining stocks and perhaps large cap miners.

[Starving Steve]

Re: Hawk talk going to lead to a drop in gold?

Gold is no "screaming buy" at $900, give or take, and neither are gold mining stox, especially NOT gold mining stox. If you have to have gold, then buy GOLD, not stox.

Furthermore, IF President Obama appoints Paul Volker to the Fed and IF he gets rid of Helicopter Ben, gold could really tumble--- like to $600 or even less. So, this is a huge risk.

Another problem for gold would be the possible appointment of Robert Ruben to the U.S. Treasury.

Another problem for gold would be a correction in the oil price back to double digits after Obama wins in November.

Finally, the whole thesis of gold going up because of inflation doesn't quite mesh with hugely discounted groceries now available at Wal Mart and Costco. Also, house prices are going down, and that fact doesn't quite reckon with the hyper-inflation logic for buying gold.

No-one here is more of a gold bug than I am, but I should warn everyone that gold is not oil. I can NOT survive even one day without oil, nor can you. But I can do quite well without my gold hoard, thank you.

My advice to goldbugs just starting out is to buy gold, little by little over time, especially on major dips to support on the gold chart. And my second piece of advice is say "NO" to gold stox because their track record has been rather p-poor.

The theory is that a doubling in gold would bring gold stox up by the square in their price ( like four-fold ), but how many gold stox have done that since gold was $450? Sad to say, few gold stox have even been able to do as well as gold itself, so why own them?

If you have to have gold to sleep with, buy GOLD and take delivery of it.

[GRG55]

Re: Hawk talk going to lead to a drop in gold?

...Another problem for gold would be the possible appointment of Robert Ruben to the U.S. Treasury...

It this happens and gold actually drops I'll double down my bullion bet.

Robert Rubin back in the Treasury would be the best thing to happen to gold since the last time he was there (on whose watch did the tech bubble develop? Ya, that tech bubble. The one that set up the step function increase in the rate of inflation we are experiencing now.)

Given his track record at Citi, he's been proven yet another over-rated hack, just like his associate Greenspan, in the wonderful world of the FIRE economy.

[Guest]

Re: Hawk talk going to lead to a drop in gold?

The Hawk-tawk may cause gold to drop some or stay flat. We have a ton of bulls so eager for "good news" they'll soar back into the market on the flimsiest of evidence it seems some days.

But longer term, talking about it isn't going to change anything that I can see. What can they do besides raise rates (and significantly, a small move probably would bounce right off after a few weeks)? That further tanks the credit-dependent economy. Back in the early 80's, w/o the 24 hour news cycle and online investing, they had the guts to do it. But today, when any misstep is pounced on by the media, I'm not sure anyone has it in them to do that.

But even if they do, with real interest rates on savings being paid in negative territory, US stocks looking lackluster or even dropping, the old escape pod of real estate still sagging, I go back to the point that got me into gold, oil, and ag commodities in the first place.

"Where else are all these people going to park their money once they "wake up" to what's really going on?" itulip was calling the tech bubble for a while before people caught on. Then gold. Etc etc. What's to say the mindset here (inflation is underreported) won't be widely accepted in a year or two?

Once they figure out treasuries they hold are losing a net of about 8% a year after inflation is factored in, suddenly the "I'm going to park my money in safe stuff and wait it out" doesn't sound so feasible if one's money is worth a lot less by the time you're ready to re-enter the US stock and RE markets.

Unless they choose to flee to foreign stocks or currencies and ignore gold. But those have their own problems.

I also could use help putting the current US govn't deficit into perspective vs the entire economy. It looks like it's fast approaching a critical mass situation where it will start to increase out of control (bond rates rising, recession decreasing tax revenues and increasing demands on govn't services, etc). Seems like it could get crazy really quickly.

Toss in the threat of Iranian conflict, the always-present threat of terrorist attacks here, and I wouldn't count on gold dropping in the medium term. Of course it can always have a bad week or two based solely on short term news items until they cry wolf with "things are getting better, the worst is over" once too often and people stop believing them.

[Guest]

Re: Hawk talk going to lead to a drop in gold?

It looks like it's fast approaching a critical mass situation where it will start to increase out of control (bond rates rising, recession decreasing tax revenues and increasing demands on govn't services, etc). Seems like it could get crazy really quickly.

You put your finger on a main point I think brucec42. When TSHTF, or for that matter when any secular trend nears it's "working out point" events do not proceed in a linear fashion. Does anyone notice how they tend to proceed in exponential curves instead? According to this notion, when dollar / gold / fiat dysfunction / goosed commodities markets / global shortages / dollar repudiation / peak cheap oil etc. etc. all get towards a nexus point, trends beging to "curl up and away" from linear progressions.

The moral would seem to be that you have to parse the outcome as best you can and position for the end outcome you think most likely. No trend hopping, stop losses, second guessing, second thoughts, excessive "diversification", hemming and hawing, or myriad of other quintessentially human (and self defeating) responses. You have to have A) guessed the right ultimate outcome, B) positioned yourself for that outcome in a non-trivial way, and C) not have gotten "all squirrely" as the crap was looming ever closer and shot your own best laid plans in the foot.

In short, playing this right requires finding the widest set of parentheses on the decade long equation and standing pat (Charles Mackay where are you?). A very tough order to fill but not impossible. There are a few writers out there who have hinted at the most simple and reliable stances to get through it. The insight you are pointing to is that "trends curl away from straight lines" and become ever more pronounced as they progress to a conclusion. It's easy to lose the conviction of one's positions when the trends "are curling away from those straight lines", because the world appears to be coming unglued in every direction.