Tag Archives: Gold

China’s Gold Holdings

By Steve Saville

Total guesswork regarding China’s gold holdings

Last year I noticed an article by Alasdair Macleod containing an estimate that China (meaning: China’s government) had accumulated 25,000 tonnes of gold between 1983 and 2002. I would say that this estimate was based on rank speculation, but that would be doing an injustice to rank speculation. It is more like total guesswork. It is largely based on assumptions that are either obviously wrong or that have no supporting evidence. I bring this up now because it looks like the 25,000-tonne figure that was plucked out of the air by Mr. Macleod last year is on its way to becoming an accepted fact in some quarters. For example, it forms the basis of a new estimate that China’s government now has 30,000 tonnes of gold.

Continue reading China’s Gold Holdings

Tilting at Golden Windmills

By Biiwii

dq.windmillsThere is a writer we’ll call Don Quixote who is tilting at something that no longer really exists… the evil gold promoters that used to be taken seriously by innocents to the tune of near total destruction of their portfolios.

Don once went on about the gold cult and I even highlighted his post because I had been going about the gold cult as well.  The cult-like aspect of the gold “community” (← a dead giveaway) was real, and the group-think that the 2001-2011 bull market fostered was very strong and really damaging to those who did not question its tenets until it was too late.

Continue reading Tilting at Golden Windmills

Around the Web

By Biiwii

Rummaging for financial news and analysis from around the Web…

  • Gold-CCI & GDX and Gold CoT Improving, But…  –NFTRH  [biiwii comment: hey look, a fledgling rally appears to be getting started, but with PDAC next week the gold bug dream machine could get a bump up again and the sailing beyond the near-term is not yet indicated to be ‘all clear’]
  • We poke a little fun at PDAC, but clicking the graphic yields details of a conference that can actually be taken seriously…

mises

  • Healthcare/Biotech Names Still Dominating  –B.I.G.  [biiwii comment: don’t I know it… did some profit taking last week but also a little replanting within the Bio’s.  The weekly BTK chart has been bullish and until that changes, it’s on a trend]
  • Periphery Fragility List  –Credit Bubble Bulletin  [biiwii comment: i just found doug noland again, so CBB will be back either in ‘around the web’ format or directly published]

 

Gold: Value, Re-Propositioned

Last weekend, in a segment titled Gold Obsession & Ephemeral States of Mind NFTRH 330 talked about a growing presence that seems to follow Martin Armstrong’s anti ‘gold promoters’ theme.  This theme seems to be – coming as it does in a gold bear market – something of a promotion itself; just as the over-the-top inflationist gold bug stuff was during the bull market.

Please understand, dear followers of Marty, I am not at all calling him a promoter.  He is the originator of ideas, thoughts and analysis that while not all my cup of tea, is interesting enough that it is linked at NFTRH.com and Biiwii.com.  But behind this mindset that is solidifying in the public consciousness, is a growing cadre of gold bugs – some of whom benefited from the notoriety lavished upon them by the likes of Mr. Gold, Jim Sinclair – that seems to be taking things over the top*, as always seems to happen with humans and in markets.  Every mental elastic band seems to stretch too far.

In the above noted NFTRH 330 segment an article I wrote in 2007, A Value Proposition, was referenced.  In re-reading it for the first time in years I was impressed with how the ‘value’ case for gold has not changed one bit in the last 7+ years.  At least in my interpretation of value, which has kept me personally at an even pulse rate during the bear market and given NFTRH subscribers consistent perspective through a difficult, but ultimately necessary and healthy phase for gold.  It felt refreshing to re-read it.

So, if the article benefited me, its author, all these years later, I thought it might be of benefit for other peoples’ perspective as well in this emotional time of gold obsession.

As a final note, I’ll just say that it sure is interesting that today, in a wicked bear market, gold is nearly $500 an ounce higher than it was when the article was written.

* I have done my share of gold bug critiques, complete with the requisite incoming hate mail.  But the point is that the new thing going on now was nowhere to be found when it was unpopular to take shots at the gold bug ‘community’.  Indeed, with the help of a subscriber who stated ‘enough already, we get it!’ I came to realize that the horse has been dead for a while.

A Value Proposition  (November 3, 2007)

As the rot in Wall Street’s dark alleys works its way from the inside out, from the seediest hedge funds’ leveraged ‘investment’ vehicles to Main Street’s financial institutions (pensions, 401K’s, savings, etc.) gold has taken center stage, closing above $800 for the first time in its still young bull market. Fear and anxiety are increasing as the US Dollar falls further below serious long term support and in this environment, gold is an emotional conduit through which growing fears of fiat monetary instability pass. Picture a burning building with a limited number of exits and a large crowd trying to pile through the door. Let’s call it a… oh I don’t know… let’s call it a casino.

Gold is the object of many strange and varied perceptions, perhaps because it is an ancient asset that has always stirred basic human instincts for wealth, good fortune and even survival. But in light of the perverted and multi-headed monster we call a financial system – with seemingly infinite instruments of ‘profit’ limited only by the imagination of financial engineers – perceptions toward gold have become distorted, helped by an enabling Wall Street and mainstream financial media.

The main point to remember is that gold does nothing; it just sits there and does not care about the crazy gyrations going on all around it. But to understand and accept this, casino patrons must first accept that the metrics they have been schooled in and the rules they have been taught over the fiat decades to play by are not applicable. Filling the void that this lack of understanding creates is a whole host of opinions, many disparaging and/or dismissive. Others simply attempt to fit this “asset class” into conventional metrics. The inspiration for this missive was a recent SeekingAlpha piece by Brad Zigler called All That Glitters May Not Be So Golden. Mr. Zigler did not write a ‘hatchet piece’ on gold but what I find interesting is his and many other financial media correspondents’ analysis of gold as a return (or lack thereof) instrument.

Gold pays no risk premium as it carries no default risk. But in the world of financial media-fed perceptions that is a bad thing. No return you say? No markup? No leverage? Who needs that?! Gold is about value and nothing more in my opinion. That is why I refuse to get excited when its fiat currency denominated price goes up and why I also remain at a normal pulse rate when said ‘price’ declines sharply. I do agree that when trading or investing in the gold miners (as I do) it is important to keep traditional metrics in mind. But the miners are my casino of choice and I most certainly do not see the gold miners as gold, a gold equivalent or anything other than a potentially hugely leveraged play on an enduring asset of value.

Back in the real world, players are just beginning to get the hint that the risk they have taken on in the hunt for return in some very dark corners has come at a price and the price is a massive debit against the entire system of something for leveraged nothing. Yes, gold pays no premium but neither is it subject to this debit because it never went anywhere to begin with. It Is What It Is and as a barometer of global financial sentiment its exchange value is rising versus a whole host of paper promises not to mention many hard assets. So what many investors now need is a sort of 12 step program as they attempt to ‘put down the crack pipe’ and come to an understanding that real value has nothing to do with return (unlike modern portfolio and asset allocation theory) and it certainly has nothing to do with leverage.

Mr. Zigler’s assertions and my responses:

Debate has raged for some time now about the utility of gold in a portfolio. Forget, for a moment, the breathless claims of infomercial touts and Parade magazine advertisers. Think, instead, of asset class selection.

Why should anyone add gold—or, for that matter, any asset—to a portfolio? The answer that comes immediately to many people’s minds is “return.” It’s the promise of outsized, and often outlandish, returns that entices people to call that 800 number in the wee hours of the morning to get their hands on the yellow metal.

There should be no debate. An asset of historic value belongs in a portfolio if debt obligations (bonds) and calls on corporate earnings (stocks) belong there. I agree, the 800 number pitch men are seedy characters capitalizing on fear and insecurity, but why are they part of the conversation? Have you ever seen the movie Boiler Room? The world of stock scams dwarfs that of unscrupulous precious metals dealers.

Gold isn’t the end-all, be-all, however. In the long term, the metal’s price is notoriously unstable. Since gold’s price was allowed to float in 1970, its annualized standard deviation—its price variance—has been clocked at nearly 20 percent, versus 15 percent for blue-chip stocks. And in that time, gold’s return has only averaged 8 percent. The S&P 500 earned 11 percent per year.

There is the word “return” again. The reason gold has under-performed over the measured time frame (minuscule in the context of history) is because contrary to what some gold bugs may think, there certainly was upside to the fiat money system. This upside was manifested in liquidity to build out all manner of productive enterprise. The United States for example spent the majority of the 20th century on the upside of this build-out. The question now becomes ‘do we remain on the upside or have the secular changes beginning in and around 2000 marked a decided switch to the inevitable payment to the piper (of the debt used to keep the dream alive)?’ If you think there is still productive upside, you will see gold’s ‘return’ as sub-par. If you believe that secular changes are at hand, you are looking for that exit door in a crowded casino and you don’t give a damn about return. You want to stay whole.

So what return can we expect from gold? Well, financial theory says you can’t expect any increase in an asset’s value without growth prospects. Stocks’ expected return derives from earnings growth. Issuers of corporate securities can create things and grow. There’s a real prospect for a company trading its shares or warrants to be worth more and more as the result of management decisions. Gold itself doesn’t produce earnings, and for that reason its expected return can be approximated as zilch. Nada. Bupkis.

Mr. Zigler is correct. Gold provides no ‘return’ in the modern asset allocation theory sense of the word. But in bringing the word ‘value’ into the equation he again shows how modern portfolio theorists are trained; no return, no ‘growth’ = no value proposition. Gold does not stand at $806 this morning because of its growth but rather because of its retained value vs. paper instruments – USD first and foremost – which are coming under heavy questioning. It should be noted that in the US the stocks of these growth entities are denominated in USD.

Appreciation in the price of gold, of course, does occur. History attests to that. There’s just no reason to expect it. What influences the price of gold are external, not intrinsic, forces.

It appears Mr. Zigler and I have been watching two different financial systems over the last several years but I certainly agree that gold’s value is affected by external forces.

He then goes on to write about the gold miners which is my usual subject matter on the TA Blog [edit; much less so now, as too many patrons micro manage every squiggle in this sector publicly and NFTRH reserves most of its gold stock analysis for subscribers], so I will just end here this critique of modern portfolio theory as it applies to gold. I hope it helps shed a little light on an alternate way of thinking for a few people.

I will leave you with a final thought that I was taught early on in a school of decidedly unconventional asset theory. Price is price and value is value. They are not one in the same. Unfortunately that simple thought has been schooled out of the masses. I have no doubt that pitchmen of all types will come out of the woodwork to hawk the golden solution to an awakening public. A fortunate few will keep it simple however and remember that real value is enduring and real value is not a pitch. I find value splitting wood at my wood pile. I find value in jamming loudly on guitar. I find value in Google. I find value in the air I breathe. I find value in remaining financially whole. I do not find value in debits attached to an unpayable black hole.

Key Market Update – Metals

By Ino.com

metalsApril gold was lower overnight as it extends the decline off January’s high. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near-term. If April extends the aforementioned decline, the 62% retracement level of the November-January-rally crossing at 1199.50 is the next downside target. Closes above the 20-day moving average crossing at 1257.00 are needed to confirm that a short-term low has been posted. First resistance is the 10-day moving average crossing at 1231.80. Second resistance is the 20-day moving average crossing at 1257.00. First support is the 62% retracement level of the November-January-rally crossing at 1199.50. Second support is the 75% retracement level of the November-January-rally crossing at 1176.10.

March silver was slightly higher overnight as it consolidates some of Tuesday’s decline. Stochastics and the RSI remain neutral to bearish signaling that sideways to lower prices are possible near-term. If March extends the decline off January’s high, the reaction low crossing at 16.210 is the next downside target. Closes above the 20-day moving average crossing at 17.323 are needed to confirm that a short-term low has been posted. First resistance is the 20-day moving average crossing at 17.323. Second resistance is January’s high crossing at 18.505. First support is the reaction low crossing at 16.210. Second support is the reaction low crossing at 15.510.

March copper was mostly steady in quiet trading overnight. Stochastics and the RSI are neutral to bearish signaling that sideways to lower prices are possible near-term. Closes below the 20-day moving average crossing at 255.05 would temper the near-term friendly outlook. If March extends the rally off January’s low, the reaction high crossing at 279.40 is the next upside target. First resistance is the reaction high crossing at 264.20. Second resistance is the reaction high crossing at 279.40. First support is the 20-day moving average crossing at 255.05. Second support is January’s low crossing at 241.90.

Sign up for your free daily report on Stock Markets, Bonds, Commodities, Precious Metals, Currencies and more, delivered right to your inbox.

Euro, Gold & Crude Oil

By Elliott Wave International

[edit] Since we are on the subject, I wanted to pass on this simply poetic quote from EWI’s Steve Hochberg.  I read it and smiled ear to ear…

Everyone “knows” the [Euro] cannot possibly rally with the ECB printing money and global sovereign interest rates at essentially zero. Or can it? Currency moves often create great Elliott waves because in 2015 the very nature of a currency is amorphous. None are rooted to anything tangible, such as gold. They are simply “quotes” relative to other currencies and therefore a manifestation of ephemeral states of mind. The collective changes in states of mind are not random: they are patterned according to the Wave Principle model.

He then goes on with his forecast for USD and Euro, but I wanted to highlight this because he just spoke my language perfectly (better than I could, actually), aside from the Elliott Wave stuff.

Outlook 2015: New Perspectives on Euro, Gold & Crude Oil

Experienced traders say that sometimes, just 2 or 3 good trades make their entire year.

True: If you get in early and ride the trend for a few weeks or months, that may be all you need. That’s why having a perspective on the markets is so important.

That’s also why Elliott Wave International hand-picked the best clips from their trader-focused “Outlook 2015″ video series to share with you and give you a fresh perspective in 5 key markets: EURUSD, EURJPY, GBPJPY, Crude Oil & Gold

Access this free video series now and get new video forecasts by 4 of EWI’s veteran Pro Service analysts.

Each of the four videos will show you the market’s big Elliott wave picture, give you a forecast for the weeks and months to come — plus several short, punchy, market analysis lessons in Elliott waves/technical analysis you can use again and again.

Sign up now to access your free 4-part video series >>

Cyclical Gold Ratios

If we are going to use the CCI-Gold ratio as an important indicator to global economic contraction, we might view its recent bounce as making sense with respect to a broad global asset market bounce (incl. commodities) and in the US, a break upward from the recent nerve wracking ‘swing phase’ of volatile ups and downs in the stock market.

cci.gold

NFTRH managed the bullish stock market break in real time and I personally positioned accordingly.  But I am not going to go all ‘Dow 30,000′ on you in Armstongian fashion.  I am simply going to note that the indicator above has made a cyclical trigger (most recent red arrow) and its companion, the Palladium-Gold ratio is looking none too good either (though the MA’s have not triggered).

pall.gold

If these act as they historically have, they are a ticking clock.  This clock ticks painfully slowly, but it is ticking for the economy none the less.

4 Safe Haven Investments to Replace Swissy & Gold

Trying not to pre-judge the title as flat out stupid, let’s proceed to the article…

Four safe-haven investments to replace Swiss francs and gold –MarketWatch

Where to park your money until the next crisis blows over

Greece is on the edge of a dramatic exit from the euro EURUSD, -0.09% . The Russians are meddling in the Ukraine again. The oil price CLH5, -0.46% has been hammered, creating an arc of instability across the Middle East. The global economy is, as is so often the case, poised on the edge of another crisis. If it happens, money will start fleeing to safe havens, somewhere where it can be safely parked to ride out the turmoil.

The tension builds…

But where’s it gonna go? For several generations, the answer to that question was easy enough. In a crisis, you parked your cash in the Swiss franc USDCHF, -0.12%  , or else in U.S. Treasury bonds TMUBMUSD10Y, -0.97%  , or in gold GCH5, +0.22%  . The trouble is, none of those safe havens are as “safe” as they once were.

Yes, hello… I’d like to report a casino patron sighting in the MSM?  Gold is in a bear market so it is not safe?  In other words, because the price of monetary insurance is down during what you claim is a crisis it should be avoided?  Hello?  Hello?  Is there anybody in there?  I said hello… can you hear me Joe?

Continue reading 4 Safe Haven Investments to Replace Swissy & Gold

Around the Web

[edit]  Might as well add in some of our own $.02 on the yield curve, S&P 500 and gold…  Risk ‘ON’  –NFTRH

 

NFTRH 329 Out Now

nftrh329How to promo… how to promo?  NFTRH 329 took a hard look at the realities of what happened last week and despite an end of week reversal (below SPX key resistance of 2165) it found that at week’s end the bulls and the risk ‘ON’ contingent regained their footing.

Going the other way, the rise in short-term yields vs. long-term yields was gold bearish and not friendly to Team Risk ‘OFF’.

A really good market report doing the work it has to do every step of the way.  Of course we are in the volatile ‘swing baby, swing’ market so we’ll be ready to adjust as always over the coming week.  The key is to be in proper position for when the ‘swing’ phase consolidation ends.

Around the Web