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Some Gold Charts and Thoughts

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October 06, 2009 – Comments (11)

This post will be an update to The Gold Blog. Gold/Silver/GSMs (and a little Oil for good measure) -   Sep 11, 09. Please read this blog first for my fundamental take on gold and the long term charts and counts from which the shorter term counts shown below are derived.

First things first: THIS IS NOT A POST ABOUT TRADING GOLD!!!. I am a gold investor, not a trader. If you are reading this post to get trading advice, skip it and read something else.

TMFSinchiruna and I were having a discussion on this post of his this afternoon. Here is one of my comments:

Sinch, You know I am with you man. And yes, it sometimes feels like you are going insane when you have to make the same argument over and over. (Believe me I know) :). But I appreciate your blog, always have and always will. And I know that there are *many* people in this camp. Thank you my man.

Gold is about value, gold is not about price. We know it is manipulated, we know that it is the enemy of central banks. We have tons of proof that you have provided. But that is all irrelevant.

Because gold is real money in a sea of fake paper. And when all of the funny money gets exposed for what it is (claims on debt with no intention of every being repaid, and only ever able to provide "value" through depreciation). All of these economic shenanigans are increasing the likelihood, if not guaranteeing, a currency crisis in the US Dollar. When will this happen? Who knows. Black swan events are by their definition unpredictable.

So does gold go up to 1500 from here? Maybe
Does it go up to 1100 then down to 800? Maybe
Does it go straight down to 600? Maybe.

If it does any of these things .... ** I DO NOT CARE!!! ***

I am an investor in gold. Short term all is noise. But gold is in a huge bull market because the world runs on paper, and is in control by politicians who will always choose the temporary fix at the expense of long term sound economic decisions. The is why the Dollar is going lower (and like Sinch, I take no pleasure in this). But this is the reality of the situation, and I recognize that.

So I will not time the purchase of real money with fake money. I invest in gold and happily sit through all the whipsaws up and down. And if we are fortunate to get a pullback to $800 or less, *I will be ecstatic!* Because I will get a more favorable exchange rate on real money with fake money.

Sinch, thank you again for all your blogs and the effort you put into them. I truly appreciate them.


So why am I posting some chart updates now?

Because I am bullish on gold technically and fundamentally. There have also been some very bearish counts shown for gold. But I see things differently. So I will show some technical indicators and EW counts from the bullish perspective.

But before we get into that, let me say again I DO ***NOT*** TRADE GOLD. I invest in gold. So if my count is completely wrong, and the bears are right and gold goes below $800, binve is a very happy man. Either gold is heading substantially higher soon. Or we get a nice pullback / buying opportunity.

Gold is about holding value. Gold does not pay dividends, gold does not multiply, gold does not make the world go round. Gold holds value. That’s it. So gold is not a way to get rich. Let’s be very clear about this point. Gold is a way to be NOT POOR. Like I said, it holds value.

So if it goes to $5000/oz, it means that the economic toilet paper we call the US Dollar has been ravaged / devalued by the polices of the US Government, the Treasury, and the Federal Reserve. And you can now buy that much less with the Dollar.

Read what I wrote above in italics.

I have no interest in holding large amounts of "fake money" (US Dollars) to try to time the best purchase of "real money" (Gold). Others may play that game or even advocate it. I will not. I believe a currency crisis in the US Dollar is highly probable, if not inevitable. And maybe there will be warning signs, or maybe there won't be. This is a Black Swan event in the making, which makes the timing by definition unpredictable.

So in my investment account: I am in gold now, and I add on pullbacks.

... end rant

That out of the way, here are some charts for gold

... Continued in comments section .....

Original post here

11 Comments – Post Your Own

#1) On October 06, 2009 at 8:06 PM, binve (< 20) wrote:

Monthly chart: The monthly chart still looks highly bullish with several intact trendlines. We had an ascending triangle breakout (bullish continuation) with a new high and a new high close. RSI is channeling nicely and bullishly. If you are a gold "investor", then this is the timescale chart you should be focusing on. Gold is very emotional and subject to many whipsaws. The monthly chart tunes out a lot of the noise.



Here is my longer term count (see the link at the beginning of the post for where this count comes from). Some people might say that the correction is not over or too short (bearish). That is a viable interpretation. But the one I show below is also a viable interpretation (bullish). Either way it is an argument of opinions. So look at the chart and make up your own mind.



Short term count for Gold using GLD as an intraday proxy. Not the best approach but good enough to get the general wave forms identified.

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#2) On October 06, 2009 at 8:30 PM, XMFSinchiruna (27.47) wrote:

Kudos for flipping the charts upside down. ;)

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#3) On October 06, 2009 at 10:49 PM, Momentum21 (82.23) wrote:

I have often debated in the deflationist camp but I am definitely glad I followed the advice of Sinch and others not to bet against Gold, Silver and Miners.

I still disagree with many points of the "Gold Bulls" but I have learned to see both sides and stay out of the way of the freight train. I finally pulled my "EUO hedge" against my long portfolio and have been sticking with a touch of SRS.

I almost want to chase a little of the Gold/Silver fun here. : )

So if I chime in with my deflationary theory please don't get frustrated. We all learn from reading, thinking and debating here and I appreciate the time everyone puts in. 

 

 

 

 

 

 

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#4) On October 07, 2009 at 12:10 AM, Tastylunch (29.29) wrote:

Nice action today. A definite big win for Gold bulls.  1033 was a big resistance number. See if it continues tomorrow. If so I'll add to my DGP I bought a while back.

Binve got any silver charts?

Honestly I think silver is safer/better reward to play a possible paper collapse.

 

hard to buy groceries with gold if you know what I mean

Like a dork I sold my SLW yesterday. :(

interesting counter argumnet from Andy Xie

http://www.ritholtz.com/blog/2009/10/andy-xie-why-one-bubble-burst-deserves-another/

 The big change that happened is a rapid increase in the U.S. household savings rate. It happened much more quickly than I expected and has the potential to change the global economy. The economic explanation is negative wealth effect. U.S. household net wealth declined 20 percent, or nearly 100 percent of GDP. The rule of the thumb is that it would lead to a 5 percent reduction in spending. The U.S. household savings rate has increased more than that — and continues to rise. It could rise above 10 percent next year. Because of rising savings, the U.S. trade deficit has already halved from the peak. It could halve again next year. This is why I have turned positive on the dollar.

Financial markets are still maximum bearish on the dollar. Liquidity is being channeled out of dollar into all other assets. This is why there is such a high correlation between the dollar and other assets. I think this is the most crowded trade in the world. When the dollar reverses, the short squeeze could cause a global crisis.

Remember what happened to Oil etc last year when everyone waslong commodities?

 That being said

I'm not sure that a temporarily stronger dollar is necessarily bearish for gold though. Like Mish I think gold/silver are oftenattractive in times of currency uncertainty whether it be deflation or inflation.

If we could see both the dollar and Gold rally as odd as that may seem...

 

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#5) On October 07, 2009 at 12:18 AM, Tastylunch (29.29) wrote:

Course this news kinda clouds everything in the short term

http://blogs.reuters.com/columns/2009/10/06/a-cabal-plotting-against-the-dollar/

http://pragcap.com/the-race-to-kill-the-dollar

charts/fundamentals are useless when geopolitical BS of this scale are involved.

If nothing else that makes me bullish on Gold until proven otherwise.

I kinda figure the dollar may have one last blast up before the long slide resumes. Just because that would be extremely annoying to everyone but central bankers.

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#6) On October 07, 2009 at 1:08 AM, binve (< 20) wrote:

TMFSinchiruna ,

LOL! Thanks man :)

Momentum21,

So if I chime in with my deflationary theory please don't get frustrated. We all learn from reading, thinking and debating here and I appreciate the time everyone puts in.

No worries! All opinions are welcome as long as they are expressed with civility and the debaters are respected!

Actually I have another post you may be interested in. I am very bearish on equities for the long term (which is typcially a defaltionist perpective), but I am also bearish on the dollar and bullish on gold (both inflationist persectives). I reconcile all of these views together here in this post.

Tastylunch,

Hey man!

Nice action today. A definite big win for Gold bulls.  1033 was a big resistance number. See if it continues tomorrow. If so I'll add to my DGP I bought a while back.

Absolutely! That was a nice breakthrough today!

Binve got any silver charts?

Indeed I do!

Very bullish on Silver too as you can see.

Honestly I think silver is safer/better reward to play a possible paper collapse hard to buy groceries with gold if you know what I mean

.Actually my view of a currency collapse is not a complete and utter destruction of paper. I don't think the US Dollar goes the way of the Weimar Republic currency (possible, but not likely IMO). When I say "currency crisis" I think the US Dollar Index goes into free-fall for a short period and finds new and permanent support around 30-50. I think bond rates skyrocket (long bond to double digits). That type of stuff. I don't think we go back to a barter system or hard currency or martial law or anything.

I am not pessimistic about the future long term, I am very optimistic and think the crisis will be able to be handled without soceity breaking down. I have written this before, but it is good to share again :)

I have stated that in my investment account that I am in gold and oil. Why? Because I am bullish on the very long term prospects for the economy of the US and the world.

.... Now that might seem odd, because aren't all the people who invest in gold assuming the world will end? The answer is no, at least for this gold investor. I invest in gold not because the world might end, but I invest because I firmly believe it WILL NOT!!. If I was uber-bearish for the very long term, I would build a bunker underground, stocked with years of food and buy guns. Gold? For the end of the world? It makes no sense. Why would a useless shiny metal rock be something to collect if civilization ends?

It is the same thing with fiat currency (such as the US dollar). If you really thought the world would end, why collect little pieces of green paper with faces on it? How is that possibly useful? If there is no government to give you goods in exchange for it, then there are better items for a bunker mentality.

So I invest in gold because I am an optimist.

I am not bullish on the US government. I think they will inflate the dollar into worthlessness (or devalue it highly at least). But ultimately economies WILL recover, and I want to trade my gold in for something useful. Shares in a profitable alternative energy company, or a water from seawater plant to sustain drought countries, or any number of productive future endeavors.

Gold is simply a way to maintain purchasing power as the worlds economy goes through this large contraction. So as an optimist, you should invest in gold :) Just my $0.02 (silver coins of course, not actual pennies ... :) )

I'm not sure that a temporarily stronger dollar is necessarily bearish for gold though. Like Mish I think gold/silver are oftenattractive in times of currency uncertainty whether it be deflation or inflation.

If we could see both the dollar and Gold rally as odd as that may seem

Not that odd! I have talked about this before, and here is a chart to help illustrate

I agree, there will be a "flight" to safety move / mentality that applies to all of the "safe havens" occassionally, especially Gold and Treasuries (which you have to buy the Dollar first).

If nothing else that makes me bullish on Gold until proven otherwise.

Amen brother :)

I kinda figure the dollar may have one last blast up before the long slide resumes.

Absolutely. In fact I think the Dollar is close to bottoming for a bounce that will last a few months. But then remove the inexorable slide down.

I talk about just such a bounce in this post: Thoughts on the US Dollar, Analysis of the USDX Long Term, Follow up on the Gold Blog -   Sep 17, 09

In the opening paragraphs and in this chart down at the bottom:  USD Projection Chart

Thanks for all the comments man!.

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#7) On October 07, 2009 at 1:21 AM, Tastylunch (29.29) wrote:

Cool, Silver it is for Tasty then. Danke meine freunde

ah crap we're agreeing again.

You know what happens next. :) 

well except for this part

But ultimately economies WILL recover

Not sure that's a given buddy.

I'm still waiting for Babylonian equtiies to rebound, maybe next millenium they will get back to par? :)

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#8) On October 07, 2009 at 1:36 AM, binve (< 20) wrote:

Danke meine freunde

Nichts zu danken!

ah crap we're agreeing again.

You know what happens next. :) 

LOL! Ruhhh-rohhhh. approaching event horizon :)

But ultimately economies WILL recover

Not sure that's a given buddy.

I'm still waiting for Babylonian equtiies to rebound, maybe next millenium they will get back to par? :)

LOL! Touche!. I guess I should have said, But I ultimately believe that economies will recover. Or we could all be gobbled up by an earthquake and a flood, just like the Minoans. Hmmm. 2012?  .... :) (just kidding of course).

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#9) On October 07, 2009 at 1:18 PM, outoffocus (23.09) wrote:

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#10) On October 08, 2009 at 5:49 PM, darroj (31.42) wrote:

hey binve,

Glad to see you're still at it.  I'm waiting for your oil updates to come back.  After we discussed it months and months ago, I did pick up some PWE and ERF. Hope all is well!

-darroj

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#11) On October 09, 2009 at 4:37 PM, binve (< 20) wrote:

outoffocus,

LOL! That is awesome :) Thanks :)

Hey darroj!

Thanks man. Yeah, I will put an oil updated together, good request!

Thanks man.

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