Gold price falling, markets rising

cloud_dog

StevieJ wrote: »

Am I missing something? what is the point of holding gold if the USD is falling?

Yes, you are missing something.

mrposhman wrote:

The collapse of our banking system was also very much a minority view but it doesn't mean it didn't happen.

How many of those now professing gold to be at $2,000 or $3,000 also predicted the credit crunch?

I think you'll find an awful lot of people held the view that the credit crunch / banking failures would happen but........... no one could predict when.

Wrt the numbers being quoted for gold, well, there are very few guarantees in life but there are people reasoning why gold could go to those figures. One of the key areas I look at to help identiy possible future gold value is the number of gold producers who have been hedging their production at these levels, and the answer is.......... not many. Make of it what you will.

I think Wombie hit on quite a good point in one of his/her recent posts........ Gold has gone higher (recently) and has stayed relatively high despite the USD showing a lot of strength.

No investment just keeps increasing, it goes up, it comes down but the ups tend to be bigger than the downs. As purch commented on, I beleive gold is liekly to consolidate, it has support around the USD850(ish) level but it could go as low a USD700 and still be in an uptrend.

Time will tell.

bubblesmoney

tradetime wrote: »

Hi bubblesmoney with regard to raw commodities, and it pretty much applies to all, the thinking behind it is a follows: Firstly it is a long term play, currently we are experiencing a severe contraction in demand, for everything, the net result is that inventories are being run down, supply must contract and is contracting, mines are being idled, some will even be closed, exploration and expansion projects in most cases are being shelved for now, against which the CRB Commodities Index is at a record low in real terms.

So the simple case for commodites is that eventually supply will correct to pace demand, and price will rise again to some more normalised value that will be the first leg, prices have to at least meet the marginal cost of production thus no matter how lomg the recession drags on you should realise a resonable profit.

The next leg is dependant upon the premise that the forces of supply and demand are different, demand is much more elastic than supply, that is it rises and falls much faster than supply, it takes time to bring supply online, secondly the intensity and speed of this has damaged commodity producers more than normal, as already mentioned demand moves faster but in this case demand moved so fast that large inventories were left and prices slashed, revenue lost, thus unlike a normal downturn, where producers would attempt to anticipate a demand return, producers will wait for real demand to be evidenced before increasing the supply, that is likely to spike the price of all commodities as demand picks up, even without the expected inflation of $billions on the sidelines being hoarded. That's my view anyway.

As for agricultural commodities, demand can really only contract so far, people still have to eat, and global inventories are alledgedly at record lows. But since some demand destruction is to be expected no farmers are going to produce flat out, so supplies will contract, meanwhile the worlds population continues to grow. As far as manipulation goes, i will yield to your experience on that since I don't know, what I do know however is that the population keeps rising, and while you can manipulate numbers in ledgers all you want, you cannot manipulate food out of thin air, eventually you have to deliver to the wholesalers, if food is not on the shelves prices will rise.

At the end of the day gold is a play, just like any other commodity depending on your views, right now gold is high food, base metals, enrgy are all cheap, so which do you really think has the most upside, you can buy all the gold you want, and it may well go up from here, but you can't eat it, and it won't keep you warm so you'll have to exchange it at a quantity determined by the people who have the food, and the people who have the energy, that's where the real pricing power lies.

Don't get me wrong, there is a case for gold as well, I just happen to think on a relative basis it's pricey here, there are too many people in it, and many of them have no capacity to weather a significant correction, I buy where I feel there is most upside, when I think the time is right for gold I will buy back in there too.

Below is a chart of the CRB Index going back to mid 2003

thanks tradetime for the detailed explanation.

regarding agricultural commodities taking delivery is out of the question for 99% of the people thats where the bigger players exploit the situation in their favour. also for the smaller players it is next to impossible to decide the quality of the commodity they are bidding on. bigger players have their ears on the ground all over the world (literally), i know from people intimately involved in agricultural commodity trading for decades (now retired) and have some vague idea about how things get manipulated in that sector. even if you are an expert lets say in cotton (there are numerous sub types) there is no way for you to know the quality of that particular season of that areas production unless you have ears on the ground. if you trade without that knowledge or contacts then you start off with a disadvantage even before the buying process starts. with metals etc its not that much of an issue as quality and type will be more standardised i feel. thats what i was getting at and didnt mean fiddling ledgers. forget the bigger private players, even govts get into the act in this sector, economic attaches at embassies do get involved in gathering economic info useful for govt / business interests.

gozomark

wombat42 wrote: »

Here is some hot Hendry action where he locks horns with Liam Halligan:

http://www.cnbc.com/id/29633198



The strange thing about Hendry is that he runs Eclectica which has 5 equity funds
http://www.h-l.co.uk/funds/Fund-prices?func=search&formid=1001&company=1444&sector=&investment=By+investment+name&x=23&y=12

but the only thing he is plugging is his offshore hedge fund (which has done well over the last 12 months unlike almost every other hedge fund). He is even saying short all equities which is undermining his own 5 eclectica funds.

a hedge fund's mandate is to make money
an equity fund's mandate is to outperform an index, and will typically be atleast 90% invested at all times.

If he is negative, his equity funds will be defensively positioned, and so a falling market is good for both types of funds, relative to their mandate

tradetime

bubblesmoney wrote: »

thanks tradetime for the detailed explanation.

regarding agricultural commodities taking delivery is out of the question for 99% of the people thats where the bigger players exploit the situation in their favour. also for the smaller players it is next to impossible to decide the quality of the commodity they are bidding on. bigger players have their ears on the ground all over the world (literally), i know from people intimately involved in agricultural commodity trading for decades (now retired) and have some vague idea about how things get manipulated in that sector. even if you are an expert lets say in cotton (there are numerous sub types) there is no way for you to know the quality of that particular season of that areas production unless you have ears on the ground. if you trade without that knowledge or contacts then you start off with a disadvantage even before the buying process starts. with metals etc its not that much of an issue as quality and type will be more standardised i feel. thats what i was getting at and didnt mean fiddling ledgers. forget the bigger private players, even govts get into the act in this sector, economic attaches at embassies do get involved in gathering economic info useful for govt / business interests.

Thanx for that explanation, as Indicated I have no kowledge of this one way or the other though it does make for an interesting talking point, background information. I do not take physical delivery, I hold commodities via ETF's and for fair disclosure have positions in DBA, DBB, RJA, RJZ, USL currently and off and on UCO and DTO. Am not sure if the problem you describe can impact on me, however I will do some more reading around the subject.

JYK

Thanks tradetime for an articulate and informative posting.

cloud_dog

It will be interesting to see if Gold can close above the $900 level tonight.

If it does then it might signify a change in recent direction (no guarantee in life thou). My nagging doubt is that its almost May (summer season in the finacial world).

sabretoothtigger

I was thinking it looked to be on a short term uptrend also, its probably still too early to bother with buying long term, ie. wait for a lower price

Might have something to do with gilt prices


this article says its the job figures that brought a sudden rise today, its only back to the start of the month price though

http://www.marketwatch.com/news/story/gold-rises-above-900-copper/story.aspx?guid={AE062FE7-915A-4EC3-BD01-964A44C47484}&dist=TNMostRead

cloud_dog

Yes, my logical side is looking for a lower low before its next significant rise (hopefully).

Am also getting a bit twitchy about my equity portfolio as it has experienced substantial growth over the last few months (doubling in value from its lows).

cloud_dog

China has reported that it has significantly increased its Gold reserves, increasing them by over 75%, to over 1000 tons.

There were always rumours that China was looking to diversify its foreign reserves away from the US$, and the indication now is that they will continue to accumulate more gold.

http://www.guardian.co.uk/business/feedarticle/8471411

sabretoothtigger

http://broadcast.ino.com/education/gold_200905/?midw0506

Gold ... time to look at this market again