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by Ashraf Laidi
Posted: Mar 23, 2010 16:38
Comments: 207
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This thread was started in response to the Hot-Chart:

Gold & Silver's Dead Cat Bounce

 
raulin
london, UK
Posts: 65
10 years ago
Jun 6, 2010 21:47
Silver breaking down with head and shoulders on dailies gold/silver ratio increasing
Coach
Singapore, Singapore
Posts: 43
10 years ago
May 12, 2010 3:39
@Fleetwood,

Diversification! You may consider not to put all the eggs in one basket!
Fleetwood
Florida , United States
Posted Anonymously
10 years ago
May 12, 2010 1:46
First let me say that I've never really been a GOLD bug, but I've been long GOLD (GLD calls) since 1140 when it broke out of the 4 month inverse H&S patter on 4/7 (which I think projects to about 1275ish). I'm hoping for a pullback soon, so I can add to the position.

I'm not an economist, or expert analyst like Ashraf, but I think that the long-term fundamental backdrop in GOLD is extremely attractive over the next 3-5 years. Maybe more so than any other asset class... EUR,GBP, USD, and YEN all have some pretty serious issues to one degree or another, and I think that most people will eventually come to realize that you can't solve a global debt crisis by creating more debt. The major world governments and central banks have provided massive fiscal and monetary stimulus to the tune of trillions of dollars (I heard $32 trillion globally, but that was a while ago, so I'm sure it;s probably more) in the past 3 years; and world economies are no better for it. The crisis is just being pushed forward in time, and additional leverage has only added risk to the system. The European crisis has only begun, and I don't see how the EU can survive in its current form. I have doubts that they can even execute the plan to begin with, but even if they do the tax bases will take such a huge hit that the PIGS will be insolvent.

I'm also impressed that GOLD has continued to push higher in the face of a rising US dollar. However, I understand that their inverse correlation is not perfect. GOLD also seems to have re-gained it's "safe haven" status recently. During the deflationary spiral of 2008 GOLD went lower along with everything, but US Treasuries - Now it's going higher despite the "risk aversion" in the market. Treasuries and GOLD are also moving higher together.

It seems to me that GOLD is definitely a big winner if there is inflation, and I also can see scenarios where it would be a winner in a deflation as well (or at least outperform).... GOLD has been one of the best asset classes in the world over the past decade, and I think that the fundamental backdrop is even better now.

I know that Ashraf has been cautioning of a potential larger correction to 900 for some time now, but it seems like GOLD has everything going for it at this point. What could cause that to happen? (too much speculation?)

I'm also considering moving ALL of my long-term retirement funds into either physical or paper GOLD. I think that worst case scenario is a 20%-30% correction (which I don't see happening), but even if it did stocks, and most bonds would probably be down a lot more. Over the long-term I think it will outperform all other major currencies, so can somebody tell me why I should or should not do this?
said
mulhouse, France
Posts: 2822
10 years ago
May 11, 2010 23:18
catnip

as soon as UK give the tone in increasing its benchmark interest rate then the tone for the thrid phase of inflationary period is given. te first one occur in 79 81 the second in 91 92 then the third one will be for 2010 11.
Deflation there will be but not before few years time even decades. the liquidity is gonna be withdrawn from the system and as soon it occurs as u know treasury will be less attractive and then gold will outperform ust. its not a matter of how but when.
ur arythmetic system as acurate can it be cannot predict you market psychology and it might give some false signals.

cant you feel the market pulse when u have all this ceo hearing that all the old special purpose vehicule are gonna be reactivated
and to tell you the UK will raise even by 50bps; they r gonna create an overall surprised in the amrket
catnip
Frankfurt, Germany
Posted Anonymously
10 years ago
May 11, 2010 22:58
Said
I don't think so. If yields raise it could as well mean that excess liquidity is absorbed ( IT COULD but must not ) and if economies re enter a sweet spot determined by growth and inflation exactly then gold becomes entirely unattractive.
We have a different scenario yields of sov bonds raise because there is a big lack of money. This is deflation. Gold has always reacted to imbalances of money flow. But how does it react?
I have a developed entirely mathematical theory of the value at risk of money. The enormous amount of debt does always end up in a deflationary spiral. In deflation, cash is king and its value at risk is low.
Then the price of gold must adjust to the real value of cash because first of all gold is cash. And the real value means that price of gold must fall eventually. Nevertheless gold will then buy more goods and services and labor although its price is low. That is why it is always right to own physical gold.
However if things get worse and deflation reaches a max such that all industrial production grinds to a dead halt ( all this has happened!) then a handful of gold buys a multistore appartment house with luxury condos OR food for a week. Not more. You will chose the food as you don't have a choice.
said
mulhouse, France
Posts: 2822
10 years ago
May 11, 2010 22:03
CATNIP
when yieldd will go to 4.35 then money managers will have to find an alternative to treasury.
some gold fund manager in london are expecting the big money to come in the market by end of this year next year. they say that the big hand has not been in the gold ahrdly yet

catnip
Frankfurt, Germany
Posted Anonymously
10 years ago
May 11, 2010 21:45
Said
well I cannot figure out how and why pension funds, insurers and such could go for gold...they need fixed income, after all. Gold is I think up because of uncertainty whether UK can get debt under control.
The only thing to fear is a collapse of sovereign bonds. That would immediately end low interest and would spread. It doesn't matter where such happens. It is most important instead of whatever speculation to watch UST yields and OIS and TEDspread.
said
mulhouse, France
Posts: 2822
10 years ago
May 11, 2010 21:34
INTERELATION IN MORTGAGE MARKET AND TITRISATION OF THIS DEBT ISSUANCE MAKE THAT A NO BAIL OUT OF SPAIN WILL XREATE CONTAGION ON STERLING.
BUT THE CHART DONT LIE AND SAY A DIFFERENT STORY STERLING DOLLAR AND EURODOLLAR
THE GLITCH TINGS LAST THURSDAY HAS JSUT PRECIPATED THE THINGS
catnip
Frankfurt, Germany
Posted Anonymously
10 years ago
May 11, 2010 21:21
UK is in debt of USD 700 bln at Euro banks... arithmetically it makes sense to bail out UK and let PIGS drown ...
said
mulhouse, France
Posts: 2822
10 years ago
May 11, 2010 21:15
WHEN U BAIL OUT SPAIN U BAIL OUT BBVA SANTANDER BVA BANCA VALENCIA
IN FINAL U BAIL OUT BRITISH BANK LIEK RBS HBOS AND SO ON