Gold: Deep in bear market with a grim outlook

[Ad Orientem]

http://finance.yahoo.com/news/gold-fund ... 00508.html

I figure the worst of the decline is probably behind us. Purely a SWAG, but my guess is that gold will stabilize in the $1000-$1100 range. That will help the PP bounce back.

[MediumTex]

From the report:

Our analysis suggests that gold is about to begin the steepest part of its price decline.  Under our models, what is predicted to occur over the next 60-72 months is that the price of gold will continue declining at a steepening rate until it is essentially in free fall.

What will catch many gold "investors" by surprise is that as the price of gold nears zero its rate of decline will remain steady.

Once gold punches through what we call the "zero boundary" and its price goes negative, our models suggest that it will still have a long way to fall.

When gold reaches a price in the -$225 to -$310 per ounce range, we believe that most of the damage will likely be behind us.  However, until prices begin to stabilize within that new trading range, we recommend extreme caution when it comes to the gold market.

[dragoncar]

From the report:

Our analysis suggests that gold is about to begin the steepest part of its price decline.  Under our models, what is predicted to occur over the next 60-72 months is that the price of gold will continue declining at a steepening rate until it is essentially in free fall.

What will catch many gold "investors" by surprise is that as the price of gold nears zero its rate of decline will remain steady.

Once gold punches through what we call the "zero boundary" and its price goes negative, our models suggest that it will still have a long way to fall.

When gold reaches a price in the -$225 to -$310 per ounce range, we believe that most of the damage will likely be behind us.  However, until prices begin to stabilize within that new trading range, we recommend extreme caution when it comes to the gold market.

After Lex Luthor releases a virus that makes people die when exposed to gold.

[annieB]

Don Wolanchuk says gold is making the turn and sees $2000 an oz.
He knows markets.
Go gold !

[portart]

The thing I have noticed is that trends are very stubborn and once things go in a certain direction, it can last a long time. The PP trend changed when gold dive-bombed and the market took off. Nothing over the last few years has changed although there have been some false breakouts in gold and fake selloffs in the market.  What will change the trend is the big unknown.

[portart]

It's just that, a guess. Who can know what millions of investors will do.

[annieB]

Think $2000.

Think $2000.

[buddtholomew]

I only foresee gold at 2000 if the world economy truly recovers and inflation rises above expectations. I also agree with the comment that momentum in an asset class can persist for an extensed period of time, positive or negative. This seems to favor wider re-balancing bands.

Gold is my least favorite asset. I am OK if it declines to 15.01% or increases to 35% as long as the PP produces a real gain.

[annieB]

They say when gold hits $225-$310 most of the damage will likely be behind us.
That's down 80-90 percent.
Bunch of math majors.

Wonder how many of us here could hold to gold $225 ?

[Libertarian666]

They say when gold hits $225-$310 most of the damage will likely be behind us.
That's down 80-90 percent.
Bunch of math majors.

Wonder how many of us here could hold to gold $225 ?

I would say that if gold gets to $950 most of the damage would certainly be behind us... as that would be down over 50% from the high. 

[buddtholomew]

They say when gold hits $225-$310 most of the damage will likely be behind us.
That's down 80-90 percent.
Bunch of math majors.

Wonder how many of us here could hold to gold $225 ?

I would say that if gold gets to $950 most of the damage would certainly be behind us... as that would be down over 50% from the high. 

Mathematically, of course ;-)

[Kshartle]

Why on Earth would gold drop significantly from here? Does anyone have a theory what would drive global selling of gold against the dollar? Why are people going to want to store their wealth in dollars a lot more than gold from here on out?

Do you guys think the supply of gold is going to rise compared to the demand? Will the supply of dollars decrease vs. demand?

I think the opposite of course and have made the case many times but what is the opposite case?

[Kshartle]

Gold is up about 4% over the last six months. That's not a lot and not a long time.......but I think it suggests we are in a sideways trend at this point. At what point does anyone think the downtrend will be over, if it hasn't made a new low in 9 months? In a year? What if it goes up 10% from here? Is it a function of time or % increase that will confirm an end to the downtrend for everyone?

[buddtholomew]

Why on Earth would gold drop significantly from here? Does anyone have a theory what would drive global selling of gold against the dollar? Why are people going to want to store their wealth in dollars a lot more than gold from here on out?

Do you guys think the supply of gold is going to rise compared to the demand? Will the supply of dollars decrease vs. demand?

I think the opposite of course and have made the case many times but what is the opposite case?

Core inflation for November is 1.7%, All items 1.2% If inflation continues to decline even in the face of QE, then why hold gold. Especially when real rates on long-term treasuries are +/- 2%.

[annieB]

I don't think low inflation is leading to gold selling.It's the rising dollar.
The dollar is the world safety play.

[Kshartle]

Why on Earth would gold drop significantly from here? Does anyone have a theory what would drive global selling of gold against the dollar? Why are people going to want to store their wealth in dollars a lot more than gold from here on out?

Do you guys think the supply of gold is going to rise compared to the demand? Will the supply of dollars decrease vs. demand?

I think the opposite of course and have made the case many times but what is the opposite case?

Core inflation for November is 1.7%, All items 1.2% If inflation continues to decline even in the face of QE, then why hold gold. Especially when real rates on long-term treasuries are +/- 2%.

You're talking about the CPI. What does that have to do with the supply of dollars vs gold?

Even if the general price level (not the CPI mind you) is rising only 1.2% annually currently.....That still implies that dollars are losing value relative to other things because the supply of dollars is increasing faster than the goods and services available.

So if the supply of dollars is going up at say....7% per year according to the Fed's measure of M2 (they don't publish M3), and interest rates are well below that.....if the supply of gold is going up at only 1-2% doesn't this imply a gradually rising price?

See I think the low CPI numbers represent the best time to buy and the worst time to sell. People anticipate a continuation of the future typically. Therefore....if the general price level isn't rising rapidly now....they are pricing in that continuing and the public isn't fleeing into gold, rather they are fleeing from it. But again, what rationale reason does it have to drop in value against the dollar?

2 years from now do you think there will be more gold above ground vs. dollars or more dollars than gold than currently. I think it's the latter, implying the high likelihood of price increases.

The best time to buy gold would be when the CPI is flat or negative and the worst time historically has been when it's in the double digits right?

I'll boil that down to single question. What do you think the connection is between the CPI or core inflation and the movement of the price of gold?

[Kshartle]

I don't think low inflation is leading to gold selling.It's the rising dollar.
The dollar is the world safety play.

Safety from what Annie? What is the dollar rising against besides the Yen and the Aussie (insignificant Aussie imo)?

[Kshartle]

[quote="Kshartle"]
Why on Earth would gold drop significantly from here? Does anyone have a theory what would drive global selling of gold against the dollar? Why are people going to want to store their wealth in dollars a lot more than gold from here on out?

Do you guys think the supply of gold is going to rise compared to the demand? Will the supply of dollars decrease vs. demand?

I think the opposite of course and have made the case many times but what is the opposite case?

BUDD - As I said, inflation is tame. Why do you expect a bull market in gold with low inflation? Whether you believe gold is miss-priced is irrelevant. It's not!

Core inflation for November is 1.7%, All items 1.2% If inflation continues to decline even in the face of QE, then why hold gold. Especially when real rates on long-term treasuries are +/- 2%.
[quote]

Well obviously I don't think gold will go up because I think it's miss-priced, I think it's miss-priced and factors other than my belief will drive it up.

Namely, the global supply of dollars is going to rise much more rapidly than the global supply of gold, in my opinion of course. Increased demand for protection from loss of purchasing power will be sought by holders of dollars as realization sets in that the global supply of dollars will keep growing faster than people anticipate.

I guess I don't see the relavence with the CPI vs. interest rates. (i.e. real rates). If the CPI is 1.2 and rates on the ten-year are 2.8 but the supply of gold vs. total global dollars is shrinking every year.....where are the sellers going to come from? No one here will sell right unless prices go up. Are the central banks going to sell? Do you think people currenly holding gold are going to trade them out for bonds or stocks from here?

You asked why people would hold gold at this point. I would say it's to protect against a drop in the economy hurting the real return on stocks....rising interest rates or lots of money printing.  I think we're going to get doses of all three.

10 minutes and counting until the taper decision. My vote is they don't taper but I could be wrong. I hope they do taper but if they do I'll be looking to sell stocks quickly.

[buddtholomew]

Why on Earth would gold drop significantly from here? Does anyone have a theory what would drive global selling of gold against the dollar? Why are people going to want to store their wealth in dollars a lot more than gold from here on out?

Do you guys think the supply of gold is going to rise compared to the demand? Will the supply of dollars decrease vs. demand?

I think the opposite of course and have made the case many times but what is the opposite case?

BUDD - As I said, inflation is tame. Why do you expect a bull market in gold with low inflation? Whether you believe gold is miss-priced is irrelevant. It's not!

Core inflation for November is 1.7%, All items 1.2% If inflation continues to decline even in the face of QE, then why hold gold. Especially when real rates on long-term treasuries are +/- 2%.

Well obviously I don't think gold will go up because I think it's miss-priced, I think it's miss-priced and factors other than my belief will drive it up.

Namely, the global supply of dollars is going to rise much more rapidly than the global supply of gold, in my opinion of course. Increased demand for protection from loss of purchasing power will be sought by holders of dollars as realization sets in that the global supply of dollars will keep growing faster than people anticipate.

I guess I don't see the relavence with the CPI vs. interest rates. (i.e. real rates). If the CPI is 1.2 and rates on the ten-year are 2.8 but the supply of gold vs. total global dollars is shrinking every year.....where are the sellers going to come from? No one here will sell right unless prices go up. Are the central banks going to sell? Do you think people currenly holding gold are going to trade them out for bonds or stocks from here?

You asked why people would hold gold at this point. I would say it's to protect against a drop in the economy hurting the real return on stocks....rising interest rates or lots of money printing.  I think we're going to get doses of all three.

10 minutes and counting until the taper decision. My vote is they don't taper but I could be wrong. I hope they do taper but if they do I'll be looking to sell stocks quickly.

Thanks for recovering my post as I was unable to locate my submission. Perhaps I only selected Preview and not Post.

Kshartle, I don't profess to know more about the global economy, but according to Harry Browne, we will not see a bull market in gold without unanticipated inflation. At this point in time, inflation is tame so I do not expect gold to advance to 2000. I was in the camp that QE = inflation, but it doesn't appear the case with the velocity of money low and rising income non-existent.

[Kshartle]

Why on Earth would gold drop significantly from here? Does anyone have a theory what would drive global selling of gold against the dollar? Why are people going to want to store their wealth in dollars a lot more than gold from here on out?

Do you guys think the supply of gold is going to rise compared to the demand? Will the supply of dollars decrease vs. demand?

I think the opposite of course and have made the case many times but what is the opposite case?

BUDD - As I said, inflation is tame. Why do you expect a bull market in gold with low inflation? Whether you believe gold is miss-priced is irrelevant. It's not!

Core inflation for November is 1.7%, All items 1.2% If inflation continues to decline even in the face of QE, then why hold gold. Especially when real rates on long-term treasuries are +/- 2%.

Well obviously I don't think gold will go up because I think it's miss-priced, I think it's miss-priced and factors other than my belief will drive it up.

Namely, the global supply of dollars is going to rise much more rapidly than the global supply of gold, in my opinion of course. Increased demand for protection from loss of purchasing power will be sought by holders of dollars as realization sets in that the global supply of dollars will keep growing faster than people anticipate.

I guess I don't see the relavence with the CPI vs. interest rates. (i.e. real rates). If the CPI is 1.2 and rates on the ten-year are 2.8 but the supply of gold vs. total global dollars is shrinking every year.....where are the sellers going to come from? No one here will sell right unless prices go up. Are the central banks going to sell? Do you think people currenly holding gold are going to trade them out for bonds or stocks from here?

You asked why people would hold gold at this point. I would say it's to protect against a drop in the economy hurting the real return on stocks....rising interest rates or lots of money printing.  I think we're going to get doses of all three.

10 minutes and counting until the taper decision. My vote is they don't taper but I could be wrong. I hope they do taper but if they do I'll be looking to sell stocks quickly.

Well I'm surprised.....10 BN taper. Let's see what happens to the various markets.

[buddtholomew]

Why on Earth would gold drop significantly from here? Does anyone have a theory what would drive global selling of gold against the dollar? Why are people going to want to store their wealth in dollars a lot more than gold from here on out?

Do you guys think the supply of gold is going to rise compared to the demand? Will the supply of dollars decrease vs. demand?

I think the opposite of course and have made the case many times but what is the opposite case?

BUDD - As I said, inflation is tame. Why do you expect a bull market in gold with low inflation? Whether you believe gold is miss-priced is irrelevant. It's not!

Core inflation for November is 1.7%, All items 1.2% If inflation continues to decline even in the face of QE, then why hold gold. Especially when real rates on long-term treasuries are +/- 2%.

Well obviously I don't think gold will go up because I think it's miss-priced, I think it's miss-priced and factors other than my belief will drive it up.

Namely, the global supply of dollars is going to rise much more rapidly than the global supply of gold, in my opinion of course. Increased demand for protection from loss of purchasing power will be sought by holders of dollars as realization sets in that the global supply of dollars will keep growing faster than people anticipate.

I guess I don't see the relavence with the CPI vs. interest rates. (i.e. real rates). If the CPI is 1.2 and rates on the ten-year are 2.8 but the supply of gold vs. total global dollars is shrinking every year.....where are the sellers going to come from? No one here will sell right unless prices go up. Are the central banks going to sell? Do you think people currenly holding gold are going to trade them out for bonds or stocks from here?

You asked why people would hold gold at this point. I would say it's to protect against a drop in the economy hurting the real return on stocks....rising interest rates or lots of money printing.  I think we're going to get doses of all three.

10 minutes and counting until the taper decision. My vote is they don't taper but I could be wrong. I hope they do taper but if they do I'll be looking to sell stocks quickly.

Well I'm surprised.....10 BN taper. Let's see what happens to the various markets.

I thought the news was out at 11:15.

[Xan]

It's really hard to follow this conversation with the quote tags being so badly mangled...

[Kshartle]

I said all the brilliant stuff.......hah!

I tried to fix the quotes but failed.

[buddtholomew]

Said all the dumb stuff, but fixed my portion.

[Kshartle]

Said all the dumb stuff, but fixed my portion.

I was kidding btw.

Well I think taper is a step in the right direction. There is some conflicting language with regards to the targets and rate guidance. Some on CNBC are arguing that this is not a taper but might be an expansion.

I think it will take a few days for market participants to price in the announcement.