It's looking grim again. Is gold the would-be saviour?
Discussion
AdvocatusD said:
Detroit has just gone proper bust. I find news like this sits quite uncomfortably with everyone tooting their horns about "recovery".
I think everything is still broken, but because it's the new "normal", people/gold aren't/isn't reacting anymore.
Yes. 'The new normal' certainly plays a strong part in sentiment. I think everything is still broken, but because it's the new "normal", people/gold aren't/isn't reacting anymore.
But I'm amazed Detroit has only just filed. It died in 2007 when the US car industry collapsed and has been on life support ever since.
Detroit is fascinating because it is one of the only modern cities in the West to have died. It is a town but with the legacy costs of a city.
This is an opportunity to rebuild it to fit its future rather than past. The FT did a superb supplement on it back in 2008/2009.
What it will show is the importance of allowing Greece to go bust and leave the Euro back in 2007. The biggest problem the EU has had over and above corruption is cowardice. It will be cowardice and avarice in the face of crisis that will define this period for the EU.
The policy of 'debt management' rather than 'debt solution' of the West is based on Asia not collapsing. Something which is still plausible.
But unless the EU or US start heavy money printing the demand for Gold is not going to grow significantly.
AdvocatusD said:
Detroit has just gone proper bust. I find news like this sits quite uncomfortably with everyone tooting their horns about "recovery".
I think everything is still broken, but because it's the new "normal", people/gold aren't/isn't reacting anymore.
I find it curious that gold tanked almost exactly when the Bundesbanke requested the return of their swag from the Fed vaults. I find it odd that stocks are where they are in the S&P given what is happening in Detroit 9and eslewhere) although TBF, the private sector in the city is actually seeing some resurgance and it is the hopelessly over-promised welfare and pensions of the public sector that are the key issue in the motor city.I think everything is still broken, but because it's the new "normal", people/gold aren't/isn't reacting anymore.
Guam said:
superkartracer said:
BIG crash, glad i sold @ £1450
MMM might be getting closer to a buy point soon ? 
It's going to track the news on US money printing reductions and ultimately be an inverse trade to any recovery.
It's in a clear downward trend the only trade is a sell presently.
The big question to be asking is that if we are in a recovery phase of the Western economic cycle then what reason is there for Gold to be priced above the 2007 level of $600?
Sure there is legacy fear of the last 6 years but that effect will weaken every day so the only core primary concern for short term spikes would be hesitations in the Western recovery but the only real market force to drive it up would be legitimate fears of a BRIC crash. This is not impossible by any means so a very good argument for Gold running a risk premium over the 2007 price of $600 but is that currently worth $800 on top? Not really. In fact, there is an equal argument that if there is a BRIC crash then the Gold held in those markets will ship to the West overnight and start being sold off, so in fact a BRIC crash could decimate the price of Gold.
To be frank, I see sub $500 far more likely than breaking $2000 in the medium term outlook.
DonkeyApple said:
It's going to track the news on US money printing reductions and ultimately be an inverse trade to any recovery.
Yup. I never buy gold but if I was holding any, I'd be selling.At present I am baffled by,
- Why there is a view Japanese equities are finally going to make a come-back,
- Especially when emerging markets are relatively in the doldrums. and
- Also, why commodity prices aren't rising more quickly.
Ozzie Osmond said:
DonkeyApple said:
It's going to track the news on US money printing reductions and ultimately be an inverse trade to any recovery.
Yup. I never buy gold but if I was holding any, I'd be selling.At present I am baffled by,
- Why there is a view Japanese equities are finally going to make a come-back,
- Especially when emerging markets are relatively in the doldrums. and
- Also, why commodity prices aren't rising more quickly.
Funds that are set with a crieteria of Asian equity exposure are going to be re-allocating from the high growth/ high risk Asian economies in the event that the Asian Tiger begins to look sickly but still need to be allocated within that region so almost all that money will flood to Japan where the economy is far slower than the new upstarts but is stable. At the same time, if the new economies falter then Japan will be the core beneficiary in that zone.
So, in short, if a high risk market is in the doldrums then you shift your exposure to a low risk market as the returns are the same but the risk is a fraction.
Commods aren't rising because firstly concerns over Asian gorwth, hence concerns over weaker demand so hedging trades and the loss of speculative longs are holding down values. You also have the forex differencials of most commods being priced in USD so what looks like price action in the commod is actually price action in the USD v other currencies. And finally, like Gold, nearly all retail investment portfolios in the West took up ETF commod exposure and ran very over weight for nearly a decade, now that the easy money is gone and other asset classes look more attractive then the retail money is selling out and re-allocating into the markets that will benefit from a rising rate (or at least a decreasing in money printing) environment.
The other factor about the commods is that producers will be forward hedging production so as to lock in sales values. For quite some time the producers haven't been bothering with this as the market has only been going upwards so they have been making the choice to not lock in a price today for next months production when the price will almost certainly be higher next month when you have the physical to deliver. Then you obviously have the fact that if the hedging team hasn't had any hedging work to do but has the money sitting there and prices going up then why not trade it for gain, that activity will have slowed dramatically also.
I'm still suspicious of all the monkeyhammering gold gets. And I don;t yet see convincing reasons to be cheerful about the global economy, even if the UK is doing okay, for now.
http://www.zerohedge.com/news/2013-11-25/how-gold-...
http://www.zerohedge.com/news/2013-11-25/how-gold-...
DonkeyApple said:
Ozzie Osmond said:
DonkeyApple said:
It's going to track the news on US money printing reductions and ultimately be an inverse trade to any recovery.
Yup. I never buy gold but if I was holding any, I'd be selling.At present I am baffled by,
- Why there is a view Japanese equities are finally going to make a come-back,
- Especially when emerging markets are relatively in the doldrums. and
- Also, why commodity prices aren't rising more quickly.
Funds that are set with a crieteria of Asian equity exposure are going to be re-allocating from the high growth/ high risk Asian economies in the event that the Asian Tiger begins to look sickly but still need to be allocated within that region so almost all that money will flood to Japan where the economy is far slower than the new upstarts but is stable. At the same time, if the new economies falter then Japan will be the core beneficiary in that zone.
So, in short, if a high risk market is in the doldrums then you shift your exposure to a low risk market as the returns are the same but the risk is a fraction.
Commods aren't rising because firstly concerns over Asian gorwth, hence concerns over weaker demand so hedging trades and the loss of speculative longs are holding down values. You also have the forex differencials of most commods being priced in USD so what looks like price action in the commod is actually price action in the USD v other currencies. And finally, like Gold, nearly all retail investment portfolios in the West took up ETF commod exposure and ran very over weight for nearly a decade, now that the easy money is gone and other asset classes look more attractive then the retail money is selling out and re-allocating into the markets that will benefit from a rising rate (or at least a decreasing in money printing) environment.
Even the currencies such as the Yen and the Indian Rupee which have been amongst the weakest in 2013 have appreciated against gold. So we have seen paper currencies appreciate against precious metals in 2013 which has me wondering what economic effect this may have caused in the wider world economy.
The main point of Abenomics is to depreciate the Yen and reinvigorate Japanese industry via the route of price competition. Sneakily the consequent inflation from this is also a policy aim. Having started the year at just below 87 Yen to the USD it has fallen to 101 Yen. So Japan receives a competitive advantage and a boost from a weaker currency. However on the other side of the coin the Euro area gets another push towards disinflation as everything priced in Yen has got a lot cheaper since 2012. However I think care is needed when talking of Japan as a naughty currency manipulator, as the Yen was driven higher by the infamous "carry trade" and has so far only returned to the levels of 2009.
Interesting times, and there must be a stack of classical economics textbooks which need throwing on the bonfire.
Andy Zarse said:
Digga said:
Andy Zarse said:
there must be a stack of classical economics textbooks which need throwing on the bonfire.
Can we please start with Keynes?He was just a mouthpiece for Engel's communist nonsense and never even set foot in a bloody factory.
Digga said:
I'm still suspicious of all the monkeyhammering gold gets. And I don;t yet see convincing reasons to be cheerful about the global economy, even if the UK is doing okay, for now.
http://www.zerohedge.com/news/2013-11-25/how-gold-...
I'd be very wary of ZH. It's a permabear and sometimes just a better written MoneyWeek. It's never going to publish anything positive. http://www.zerohedge.com/news/2013-11-25/how-gold-...
http://rationalwiki.org/wiki/Zero_Hedge
Interesting to look back on the last year. Commods have now been in a clear decline since mid 2012 and we are now seeing a slowing Chinese economy.
Australia has a nasty recession looming as it has boomed on commod values.
All the gold coin spankers have stopped marketing.
Certainly the gold buzz is over and lots of retail buyers are sitting on heavy losses that they are now viewing as inheritance for their kids rather than profits for themselves.
Australia has a nasty recession looming as it has boomed on commod values.
All the gold coin spankers have stopped marketing.
Certainly the gold buzz is over and lots of retail buyers are sitting on heavy losses that they are now viewing as inheritance for their kids rather than profits for themselves.
pete a said:
So is now a good time to buy gold?
There's absolutely no reason on the horizon for it to go up. Need supply to drop or demand to rise. At the 1200 level most suppliers are still making a return so no specific reason to expect supply to fall.
On the demand side, who is buying? There isn't any strong ETF demand, arguably this side is still reducing, central markets aren't buying in size and the Indian wedding season isn't going to create huge price action.
Printing presses are all slowing.
Arguably the only thing holding gold up at present is the long term horizon for Western rate rises. As soon as USD starts yielding more then you'd expect a huge switch from gold into USD and that's a shift from an illiquid market to one of the most, if not the most liquid markets so you could see a catastrophic bit of price action against gold when the US start raising rates. You'd expect, in the medium term, to see gold dip on good US employment data as that is what will herald rate rises.
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