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Gold Fever at 1174.90 We’re Out with a Buy Stop in Case
Gresham’s Law is the reason most central banks like the Federal Reserve keep physical gold, while lending dollars for bonds and stocks backed by electrons and faith. They may occasionally sell gold when they think it is overvalued, one reason GATA accused them of manipulating the gold price.
http://www.ecb.int/press/pr/date/2009/html/pr090807.en.html
We note the current proliferation of hedge gold funds and paper gold funds including GDXJ with John Paulson bringing out a new gold fund in January. These big players apply leverage to the gold price that exaggerates movements to the upside and increases downside risk.
No wonder gold went parabolic, with Trailing Sell Stops protecting terrific profits like BRYN and CDE. (Please note these are not recommendations!)
http://www.goldalert.com/stories/Gold-Price-Surges-Toward-1200-5-Reasons-for-Golds-Bull-Market
Is it possible the price of gold discounts all the bullish fundamentals including the dollar carry trade and is just trading on mania momentum?
I saw gold spikes in 1971, 1980 and now. Two of the three were followed by gold crashes. Maybe this time things are different. Maybe not.
Like oil, the last dollar refuge for big money, when things go parabolic, do they not sooner or later hit air pockets, particularly when retail trade is the most ebullient?
Do we agree on that?
http://www.cnbc.com/id/34121808
We may disagree about the effect of Gresham’s Law on ersatz gold and paper gold ETFs.
Gresham’s Law does not necessarily discuss leverage. Borrowed money is often the precursor to great declines with margin call induced selling, as we saw with Dot.com, Hunt Silver, Stock and Real Estate Bubbles.
November 30th, 2009 at 8:03 pm
Possibly… I agree that near term, gold is more likely to decline than rise. Long term, I expect it to either hold steady or soar, depending on how chaotic things get.
Also, your blog doesn’t have an RSS feed! You really should consult Wordpress and make sure it has one, it’s the whole point of having a blog!
December 2nd, 2009 at 10:31 pm
We’ve added some easy-RSS buttons. Typically your web browser should also detect the presence of the RSS feed and give you an RSS icon in the right-hand side of your browser location bar.
In any case, you should be good to go now!
-mark
December 12th, 2009 at 12:01 am
Go to 1337.20 or 417.10? Wow. That is some analysis. Subscribe to his chatroom for a week and watch all the different numbers pop up for gold, anywhere from 0-3000. I followed his calls and went 0/10 before I said enough. Better off to randomly enter a trade with a stop.
December 12th, 2009 at 2:37 pm
First let me say, thank you very much for this outstanding synthesis of information. One other recommendation would be to add a previous or next page button or arrow to move from page 1,2,3,4,5,6 to add some convenience and flow.