Gold to $1050 next year?

[Fragile Bill]

Gold ETFs Under Pressure; Banks See More Pain

By ETFtrends.com | ETF Trends – 24 minutes ago

Gold, once the darling in the investment world, is losing its luster, and exchange traded funds that track the precious metal could continue to weaken, with large banks anticipating further declines in the bullion market.

After touching $1,251 per ounce Wednesday, Bank of America Merrill Lynch was stopped out of their long positions, reports Myra P. Saefong for MarketWatch.

MacNeil Curry, technical strategist at BofA Merrill Lynch, said that its previous bullish view on gold has been “proven incorrect”? and that there is greater weakness than anticipated.

“While allowing for a near-term consolidation, the $1,270 pivot should limit the topside before the yellow metal declines towards the June lows at $1,180,”? Curry said in the MarketWatch article.

Curry argues that bears will have to see a “break of $1,155/$1,087 support to confirm a long-term top and secular turn in trend from bullish to bearish.”?

COMEX gold futures were down 1.0% Thursday, trading around $1,245.1 per ounce.

Looking ahead, Goldman Sachs Group projects gold prices could decline at least 15% to $1,050 at the end of next year due to increased downside risk, reports Phoebe Sedgman for Bloomberg. Goldman Sachs analyst Jeffrey Currie calls gold a “slam dunk”? sell for next year as the U.S. recovery extends next year.

[Libertarian666]

Gold ETFs Under Pressure; Banks See More Pain

By ETFtrends.com | ETF Trends – 24 minutes ago

Gold, once the darling in the investment world, is losing its luster, and exchange traded funds that track the precious metal could continue to weaken, with large banks anticipating further declines in the bullion market.

After touching $1,251 per ounce Wednesday, Bank of America Merrill Lynch was stopped out of their long positions, reports Myra P. Saefong for MarketWatch.

MacNeil Curry, technical strategist at BofA Merrill Lynch, said that its previous bullish view on gold has been “proven incorrect”? and that there is greater weakness than anticipated.

“While allowing for a near-term consolidation, the $1,270 pivot should limit the topside before the yellow metal declines towards the June lows at $1,180,”? Curry said in the MarketWatch article.

Curry argues that bears will have to see a “break of $1,155/$1,087 support to confirm a long-term top and secular turn in trend from bullish to bearish.”?

COMEX gold futures were down 1.0% Thursday, trading around $1,245.1 per ounce.

Looking ahead, Goldman Sachs Group projects gold prices could decline at least 15% to $1,050 at the end of next year due to increased downside risk, reports Phoebe Sedgman for Bloomberg. Goldman Sachs analyst Jeffrey Currie calls gold a “slam dunk”? sell for next year as the U.S. recovery extends next year.

I'm sure this new prediction will be much better than their old one, which would have been very expensive to follow!

[ns2]

Gold, once the darling in the investment world, is losing its luster, and exchange traded funds that track the precious metal could continue to weaken, with large banks anticipating further declines in the bullion market.

We should all take that to heart because we all learned recently how well the major banks do at looking into the future and predicting potential problems on the horizon.

I really get a kick out of statements like this - "precious metal could continue to weaken". Do tell! Can I join in with "precious metal could continue to strengthen".

I think I'm getting close to the point where I am never going to read another financial article predicting what anything is going to do. Maybe that is as close as you can get to financial nirvana.

[Pointedstick]

I think I'm getting close to the point where I am never going to read another financial article predicting what anything is going to do. Maybe that is as close as you can get to financial nirvana.

That stuff is basically the money equivalent of watching cable TV news. A lot of noise, a lot of stress generated, but not a lot of useful information.

[ns2]

That stuff is basically the money equivalent of watching cable TV news. A lot of noise, a lot of stress generated, but not a lot of useful information.

I've noticed lately that you can go to the same financial website and get completely conflicting advice on the very same webpage if you follow the links. The second most recent I can remember was the Daily Reckoning which I used to really like talking about the future price of gold. One writer says it's going to crash and the other that it's going to soar - all on the same F***ing page. So go figure.

The same thing creeped onto the Fidelity Website the other day - stocks have a long way to go - stocks are way overpriced and are going to crash.

Go figure.

25% gold, 25%cash, 25%LT bonds, 25% stocks - still sounds  like the best  long term plan to me with charts to prove it.

Modification: And throw in a few lottery tickets too, but not too many.

[mortalpawn]

The pundits said we would see a stock market correction, but they were wrong.  They said interest rates would continue to rise - also wrong.  Some of them said gold should be at $1000 now, others said $2000 - but they were wrong.  Some said inflation would be rampant - also wrong.  The fed should have started tapering by now - also wrong.  As far as I can tell the only thing that is certain is that most of the pundits will be wrong (along with death and taxes of course).

I have no idea what the future holds, and neither do they - which is why I'm in the PP now.  If gold goes to $1050, I'll hit a rebalance band and buy some more.  If not, I just continue on my merry way adding a bit each month.

History and statistics tell me that the PP has less than a 2% chance of declining two years in a row, so I see it as a 98% chance of gaining next year, no matter what gold does.  Statistically, I would be taking twice the risk with a 60-40 or traditional portfolio. 

So I'm playing the odds here...hoping for good returns with low volatility, and not worrying about some pundit says about a particular asset class.

[rickb]

History and statistics tell me that the PP has less than a 2% chance of declining two years in a row, so I see it as a 98% chance of gaining next year, no matter what gold does.  Statistically, I would be taking twice the risk with a 60-40 or traditional portfolio. 

So I'm playing the odds here...hoping for good returns with low volatility, and not worrying about some pundit says about a particular asset class.

I definitely agree with the sentiment here, but a note of caution.  A 2% chance of declining two years in a row means something entirely different than a 2% chance of declining the next year following a down year.  Assuming each year is independent (which for financial markets probably isn't exactly the case) the chances of declining in any given year is the same, whatever happened the previous year.  It seems odd, but you're equally likely to win the lottery by playing the numbers that won last week as any other set of numbers (the "twice in a row" odds apply only to the next two).

Craig's data shows 3 down years (likely soon to be 4) over the past 41 (will be 42) years.  This is about 7.5% (4 out of 42 will be 9.7%).  If each year is independent, a 7.5% chance per year results in a 0.56% chance over two years, a 9.7% chance per year results in a 0.94% chance over two years.  Rather than think about the odds of two down years in a row, a better expectation would be that next year has a better than 90% chance of being an up year - just like any other year.

[Fragile Bill]

History and statistics tell me that the PP has less than a 2% chance of declining two years in a row, so I see it as a 98% chance of gaining next year, no matter what gold does.  Statistically, I would be taking twice the risk with a 60-40 or traditional portfolio. 

Two thoughts:  (1) How can one rely on history when history (since the PP was conceptualized) has never seen an interest rate environment like today's?  (2) Given that 25% of the PP is almost guaranteed to return zero over the next several years, doesn't a comparison between the PP and a 60-40 basically boil down to a bet on gold?

[AdamA]

Given that 25% of the PP is almost guaranteed to return zero over the next several years, doesn't a comparison between the PP and a 60-40 basically boil down to a bet on gold?

No.  If it were simply a matter of which would achieve a better return, then you might be right. 

But the PP, in my mind, offers so much more safety and security that I don't think it's as simple as which strategy might do a percentage point or two better over time. 

The fact that the PP, 1, holds a hard asset (gold), 2, hold government bonds, and 3, holds cash, helps keep me far less panicked than holding a 60/40 Boglehead type portfolio (although I think Boglehead investing is perfectly fine for those comfortable with it).

I like to know that if 1970's type inflation occurs ever again I'll be protected.

I like to know that if Lehman Brothers #2 occurs I 'll be protected.

I like to know that if I lose my job I have 25% cash in my emergency fund.

Without this protection, I think I would probably be one of the many people who panic and do the exact wrong thing in these situations (buy gold at a top, sell stocks at a bottom, rob a bank if I lose my job ).

[goodasgold]

Well said, AdamA! Your concise but thorough summary of the PP's benefits in this uncertain world is exactly why I am sticking with the PP. (Although as a hedge, since this is my first year with the PP, about 1/3 of my investments are still in my old "age-in-bonds" Boglehead portfolio.)

[AdamA]

Although as a hedge, since this is my first year with the PP, about 1/3 of my investments are still in my old "age-in-bonds" Boglehead portfolio.

And that's probably fine. 

For me, I'm happy as long as I have enough in my PP to keep me from doing silly things with my money when weird or frightening things happen in the markets. 

So, a few bucks in a Boglehead is probably fine and might even be a good idea for someone who gets envious during times like right now when a BH portfolio is outperforming the PP. 

I keep almost all of savings in the PP, but I have small very speculative VP.  I've noticed that this (a solid PP) allows me to relax and behave more rationally with my VP.

[WhiteDesert]

That stuff is basically the money equivalent of watching cable TV news. A lot of noise, a lot of stress generated, but not a lot of useful information.

You write a lot of compelling stuff, but this one is good enough to be printed on a T-shirt.






 

[Pointedstick]

Thanks! 

[sophie]

Hi all, thought I would jump back in after lurking for a while...I agree emphatically with PointedStick and AdamA in that these extreme predictions are mainly fear-mongering.  We truly don't know what will happen.  I can confidently predict that gold will hit either $1000 or $2000 at some point in the future, but unfortunately no one is going to pay me to say that :-)

What this article did highlight is a potential weakness in gold funds.  Many of us are heavily invested in gold ETFs simply because that's the only practical way to hold gold in tax-advantaged accounts, and it doesn't make sense to give up the valuable 401K deduction in order to buy taxable gold.  If gold were to drop further, some of those funds might crash taking our money along with them - particularly funds like IAU and GLD.  Not exactly part of the Harry Browne plan.

The more I think about this, the more I'm wondering if it wouldn't be wise to bite the bullet (so to speak), and switch the gold funds in tax-deferred for one of the assets in taxable, with or without rebalancing.  The main disadvantage is that taxable savings would be very gold heavy indeed.  Anyone else considering the same thing?

[buddtholomew]

Hi all, thought I would jump back in after lurking for a while...I agree emphatically with PointedStick and AdamA in that these extreme predictions are mainly fear-mongering.  We truly don't know what will happen.  I can confidently predict that gold will hit either $1000 or $2000 at some point in the future, but unfortunately no one is going to pay me to say that :-)

What this article did highlight is a potential weakness in gold funds.  Many of us are heavily invested in gold ETFs simply because that's the only practical way to hold gold in tax-advantaged accounts, and it doesn't make sense to give up the valuable 401K deduction in order to buy taxable gold.  If gold were to drop further, some of those funds might crash taking our money along with them - particularly funds like IAU and GLD.  Not exactly part of the Harry Browne plan.

The more I think about this, the more I'm wondering if it wouldn't be wise to bite the bullet (so to speak), and switch the gold funds in tax-deferred for one of the assets in taxable, with or without rebalancing.  The main disadvantage is that taxable savings would be very gold heavy indeed.  Anyone else considering the same thing?

I hold a significant amount of GLD in a taxable account and will be able to harvest the losses if the ETF plummets to zero. That is a positive and obviously not an option in a tax-deferred account. Also, gold does not pay a dividend so taxable is an appropriate location for the asset. Hold enough of the other assets in taxable so that you balance out the risk, even if it requires you to pay additional taxes. At least that is the portfolio structure that has worked for me. 

[stuper1]

Harvesting the losses if the ETF goes to zero will only get you a fraction of your gold back.  Wouldn't you be much better off holding physical gold?

[buddtholomew]

Harvesting the losses if the ETF goes to zero will only get you a fraction of your gold back.  Wouldn't you be much better off holding physical gold?

Correct and that is inline with the PP philosophy. I intend to TLH at year's end and slowly begin replacing shares of the ETF with physical.

[dualstow]

Physical gold - Budd, I'm having a vision of you benchpressing your holdings. Can't do that with ETFs.

[buddtholomew]

Physical gold - Budd, I'm having a vision of you benchpressing your holdings. Can't do that with ETFs.

I would need over 5000K to purchase a suficient amount of gold for benchpressing purposes. Only 800K is required for dumbbell curls. That seems more attainable.

[MediumTex]

Two thoughts:  (1) How can one rely on history when history (since the PP was conceptualized) has never seen an interest rate environment like today's?  (2) Given that 25% of the PP is almost guaranteed to return zero over the next several years, doesn't a comparison between the PP and a 60-40 basically boil down to a bet on gold?

Welcome aboard Fragile Bill.

Contrary to your suggestion above, I would say that we have been in the current interest rate environment for over five years now (i.e., 0% on the short end of the yield curve and under 4% on the long end of the curve), and over that period the PP has returned about the same on an inflation-adjusted basis as it did in the three-plus decades prior to that.

After listening to people talk about interest rates for years now, I have concluded that to some people a very low interest rate environment is just troubling.

To such people, ultra-low interest rates can be the economic equivalent of looking at the ballet bars in a dance studio for midgets.  No matter how much they try to accept it, there is that voice in their heads that keeps saying: "Those are too low...they're just too damn low."

[rickb]

Seriously?  Old threads are bumped by ads, that know my browsing history?  I think maybe it's time to kiss this forum goodbye.  Believe me, I know it takes time and money to host a forum.  However, rather than sell our participation to the highest bidder (who will have correlation engines you simply would not believe) for the few nickels they're willing to pay, I'd much rather participate in a forum that regularly asks its members for donations or is funded by some (relatively) mega-rich benefactor who simply pays the expenses (probably in some tax advantaged manner - I'm sure somebody here could set up a foundation, perhaps the "Gin Crawl Road Foundation", whose charter could include paying the relatively insignificant costs incurred by hosting this forum).

I'll hang around for while, but my very strong inclination is to leave.

[dualstow]

Seriously?  Old threads are bumped by ads, that know my browsing history? 
...

What do you mean by this, rick? I thought this thread started just a couple of weeks ago.
And, I used to see ads bumped by threads, but not the other way around. I have ad-block for chrome, so I don't see any ads anymore, but what old thread was recently bumped? Do you mean it was bumped by a spambot?

[rickb]

Seriously?  Old threads are bumped by ads, that know my browsing history? 
...

What do you mean by this, rick? I thought this thread started just a couple of weeks ago.
And, I used to see ads bumped by threads, but not the other way around. I have ad-block for chrome, so I don't see any ads anymore, but what old thread was recently bumped? Do you mean it was bumped by a spambot?

Sorry - I thought the last actual post to this thread was some time ago and that it showed up as having new posts because of the ad that was included in the thread at 2:03 am Eastern time this morning.  Looks like it was normal posting traffic rather than the ad.

On the other hand, the major issue here (the ad content being based on browsing I've done at other sites) tremendously concerns me.  To make this work, the advertiser must be given something to allow them to correlate my browsing session here with my browsing sessions elsewhere (likely my IP address or a browser cookie), and now they know that whoever is browsing this site is (highly likely) the same person who browsed the other sites.  From bits and pieces like this, the advertiser then tries very hard to identify exactly who it is that is browsing and the more hits they get from different sites the closer they can get to figuring this out.  Once they do this, they can then sell targeted ads.  This site only sells the opportunity for the advertiser to insert ads in threads - but the advertiser also collects information every time a thread with an ad is viewed (which could include not just that the "target" is browsing this site, but also the specific thread the target is viewing). 

I think the bottom line is that unless you somehow block the ads here, your participation in this site is being monitored by advertisers and is being correlated with virtually anything else you might doing on the web with the goal of trying to figure out who you are - all the better to be able to sell you stuff or to sell the information they collect to anyone who might want it (for any purpose whatsoever).  Boating accidents notwithstanding, the identity of the folks who participate in this forum seem to me like something that shouldn't be easily determined.  I trust Craig and Medium Tex.  Random advertising companies and whoever they might sell their data to, not so much.

[l82start]

"Google analitics" and a few others are the tracking scripts that run under web pages,  i use adblock plus with an add filter and a privacy filter that block most/all/enough? of the scripts that run adds and track browsing..  if you want privacy security and don't like viewing adds it is the only solution i know of.

as far as i know the forum owners and moderator have little or no control over blocking this stuff from their end,  aside from refusing adds, which might only have a limited effect.. 

[flyingpylon]

I had no idea what you guys were talking about until I remembered that I use the old "Core" theme to view the site.  The only ads that show up under that theme are the ones at the top for the Permanent Portfolio book (which seems reasonable to me).  So perhaps that's a solution for some people.  I use the Core theme because it seems better on my iPad than the new default theme.