Gold, silver, oil, copper, you name it - commodities are getting killed as the world readies for a US recession. Time to buy or is this a classic post-bubble rotation, along with the getting-desperate selling of houses, into the relative safety of liquid cash?
Gold has been correcting for 4 months since the 12 May 2006 peak. It is time to consider whether the correction is nearly over or whether we can expect more down or sideways action.
It is important to have a clear understanding of the difference between corrections in the gold market as opposed to corrections in base metals. Base metals are produced for consumption, unlike gold which is produced for accumulation.
The market price of a base metal is largely regulated by current supply of physical metal relative to the existing level of demand. If demand exceeds supply, above ground stocks will be drawn down until they are exhausted (e.g. nickel recently) at which point the price of that base metal will rise sharply to ration the available supply to the highest bidder.
If there are short positions in the market, they will probably get flushed out at this time. A brief short squeeze will push the price above the equilibrium level and the base metal will then correct back to the equilibrium price.
In the case of gold, the metal is not consumed and large above ground holdings of gold exist. Thus there is generally plenty of above ground gold supply in normal circumstances to meet any exceptional demand.
One should place an emphasis on normal circumstances because people who generally buy and hold gold do so because they understand the concept that it is the ultimate store of wealth and that gold provides protection against the inevitable demise of our existing world wide fiat currency system.
September 12, 2006
Commodities are getting routed as people move into cash. Time to buy or keep selling?
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Actually gold is consumed. Many high-end electronic components such as graphic cards and signal cable use gold plated connections.
Millions of these are made every year. Not much of that gold will ever get back in circulation.
I just bought 500 slv coins yesterday adding slv to my (still too small) collection of gold coins.
There are a lot of people that extract gld from scrap electronics.
Gold - like the media is being munipulated.
So I would say Keith for you - stay in cash ...it's what everyone else believes.
What did buffet say - do something other people are not doing...
Hey racist ANONs - help me out here.
Negative US savings rate, 10+ TRILLION in gov't debt, bubble in housing, record trade deficits etc...
I think gold and silver will perform better than stocks and bonds in the next 5 years.
I also think China will tire of the US increasing the money supply.
Essentially, when gold broke through last year's 490-520 upper band, it went into a bubble vis-a-vis commodities.
On the flip side, however, the fundamentals for the metal are strong so there's a solid bottom in any blow off type of pattern. The key is to watch for the commodities bull to burst completely and then you'll know Gold's true support, given market fundamentals, which is probably in the 450-500 zone, a lot higher from the 1998 bear market low of 280.
Hey racist ANONs - help me out here.
Ummm, you're still a dick, Dick.
Richard, what if your sanity is really insanity and what if everything you think is being manipulated really isn't? It would all be the opposite. The only thing being manipulated would be your mind. What if?
Gold is a hedge against a falling dollar. Long term the USD is toast because we have no manufacturing base, we have no savings, and public and private debt is at historic levels.
So tell me again why gold is a bad long term investment.
Tabasco - thanks for getting a handle.
:So tell me again why gold is a bad long term investment.
It's great long term, it's just too choppy for short term intermediate trading purposes.
Many people make their dough during gold's ebbs and flows in either directions but those patterns are fairly erratic and knock out the newcomers pretty easily.
Richard, no problem. I've always wanted to have a fake name. Next step for me: fake business cards with a picture of somebody else on it.
I don't like the long term prospects for the US dollar, or for that matter, any fiat currency. I have a fair amount of precious metals, but I also have a certain amount of cash in case the deflationary game plays out. It's OK to play the market, but bear in mind that during a major market implosion the rules will be changed to screw the shorts. So take your winnings home (or better yet, somewhere that isn't home).
I have been moving to a cash position since I think we're due for a correction. I think the powers that be will try and keep the market elevated until the US election, but there is the possibility of a market event happening anyway.
Just like "V" tabasco??
will u wear a mask?
will u fight the good fight?
wow - ur really cool!
:The world does not need commodities when it is in recession/depression.
Well, silver held its ground during the '33 to '39 period, going from the first wave of the commodities bust of $0.25/oz to $0.75/oz. Part of the reason for it was that it was illegal to own gold during the depression (FDR executive order in '33) so silver was the defacto gold alternative during that decade of economic instability.
My bet is to drop the non-collectable commodities (i.e copper, zinc, nickel, oil, pork bellies, etc) but retain some position (10% or less of one's portfolio) on gold/silver because of the whipsaw effect of dollar appreciation vs depreciation during a re-balancing period.
No, I will not be wearing a mask like a movie character or fighting any fights, good or bad. The key to faking things, Richard, is to not try so hard, or else it looks, you know, fake.
"There are a lot of people that extract gld from scrap electronics."
Are you saying that we're turning to scavenging now?
darn
Since we are talking commodities - here's an interesting piece on oil from a group I belong to.
The problem with Methadone treatment for drug addiction is that it keeps the focus on the addiction, through the use of an alternative, rather than shifting the addict's focus to preparing for and building a life for after the addiction. The problem with keeping the focus in the peak oil debate/discussion on the energy component of oil and trying to find alternative fuels to replace the energy derived from oil is that it keeps the addicts (all of us) focussed on the addiction rather than developing a new paradigm for life after the oil to which we are addicted is no longer available at a level that that addiction can be supported.
As long as we allow the peak oil dialogue to stay focussed on the
energy issues we are playing right into the hands of the pushers who
are feeding that addiction. We allow debunkers an easy target to
focus on by promising all of those existing and potential energy
sources. They offer ethanol which, like any good addict, allows us
to continue to put out good money for the next fix rather than
considering how to put food on the table. In a world that cannot
produce enough food to feed our 6.5+ billion population with
billions of dollars of oil-derived petrochemical inputs, we turn to
ethanol to support our addiction at the expense of taking vital food producing land out of the food production system. The global
emergency grain reserves over the past several years has dwindled
from a marginal 119 day supply to a sub-critical 57 day supply.
Global grain production has fallen below global grain usage in each
of the past three years and will probably continue to decline while
the population continues to rise.
The pushers feeding our addiction offer us coal to liquid (CTL),
natural gas to liquid (GTL), tar sands and oil sands and oil shale,
electric cars, hybrid cars, all to continue our addiction rather
than offering methods of kicking our addiction and moving on with an addiction-free life.
We can not cure our addiction by continuing to substitute new
alternatives in support of that addiction. At some point we have to get refocussed. The longer that takes, the more difficult it is
going to be and the greater the number of casualties that will
result.
Kick the habit.
Bypass the methadone.
Get clean.
Move on.
Richard Embleton,
Richmond Hill, ON
http://oilbeseeingy ou.blogspot. com
I buy gold with paper because it is heavier.
"I have over 70% of my worth in cash I can access quickly."
Nowadays we think "cash" as entries on some electronic ledger is the same as traditional cash, currency, coins, etc. But in reality we need to make a distinction. Those new banking regulations alllow U.S. banks to limit withdrawals to ammounts they determine are "reasonable". If you walk in and demand cash, the bank can limit how much you get that day. If you close your account, they can settle with a bank check instead of cash. They can even delay that that final payment up to 25 days at their discretion. You might end up having to visit a Federal Reserve bank in a major city to present that check and actually get cash.
Banks are now the roach motels for cash -- it goes in, but might never come back out. Welcome to the 21st Century.
Don't forget that the banks act as the government spies if you withdraw $10,000 or more in cash. I withdrew $17,000 in cash to buy a used vehicle, cash on the barrel head. The bank had to fill out government forms showing what I did for a living, how much cash I was withdrawing, etc and they sent that to the IRS. Just another slice into our freedoms, god knows what kind of "suspect" list I'm on now. Paranoia, maybe a little, but if I'm not now on a list, then what's the point of the form, into a (another) database I go.
Tony
Canned hams, bobblehead dolls and pokemon cards.
Cash is king! I am getting 65 in WaMu.
hey autofx -
How's your holy grail of investing doing? 2% in Gold now huh?
you are a hypocrite
Phoenix gets over 80% of its water from surface flow not aquifers.
Yes I agree peak water is a serious issue.
Perhaps "peak civilization" is a good term.
Hey but careful what you say on this blog - if it ain't status quo - you're a nutjob...
Right ANONs??
Speaking again of commodities...
"This mass hallucination generated by this totalist capitalist
system, the state as engine of profit, is one thing. Life on a real planet made of dirt and water and flesh both warm and cold-blooded is quite another. Viewed from outside the web of Western illusions, say, an Iraqi citizen or a Filipino Moro, one finds the economic engine to be driven by unseen death and war and the pillaging of the weak by the powerful. All this is set against the backdrop of explosive human disease, growing starvation, the impending failure of the environment and petroleum based civilization, resulting in
the greatest mass extinction event in the history of this planet.
The Big Die-off. And in your very lifetime too. Admission is not
only free, it is compulsory."
Do you dare read the rest??
http://www.joebagea nt.com/joe/ 2005/04/back_ to_the_anc. html
Hey paintblot, get a clue. Your chart proves that gold holds its value over time. Chart the USD over 30 years and you will see it has lost tremendous value.
“There is NO compelling reason to own gold. There is NO compelling reason to own silver.”
Here’s just one itsy bitsy reason:
IMF Identifies Risk of `Disorderly' U.S. Dollar Drop (Update1)
By Mark Drajem and Shamim Adam
Sept. 12 (Bloomberg) -- A ``disorderly'' drop in the dollar is the biggest risk to world financial markets, the International Monetary Fund said, urging policy makers to prepare and act quickly when asset prices slump. Investors are buying U.S. bonds under the assumption that the dollar won't slide, and a drop in the currency might turn into a rout as foreign investors and central banks move to cut losses, the global financial watchdog said.
Click Here
Gold - like the media is being munipulated.
i'm so sick of hearing this conspiracy drivel. the gold market is no more manipulated than the sugar, auto parts, kiwi, stock, treasury, porn, or beanie baby markets. please! wlak out of your house and you are immediately and relentlessly being bombarded with manipulative images, sounds, arguments, etc.
as for the media, the media ARE THE MARKET!!! the market is made up of speculators working 24/7 to game each other and to shave pennies on multi-million-US$ trades to make a profit/living. everyone is scheming, gaming, tipping, dissembling, and providing disinformation, and just plain lying ALL THE TIME. that IS the market, and the media are no more guilty than anyone else in influencing THE GAME. it's not the members of the media's job to tell you or anyone else "the truth"; they want your money, and all of it if possible. however they can get you to hand it over is what they will say or do.
grow up, you whiners. if you can't handle the BS from the media and speculators, put our money in CDs or US treasurys and sleep well at night.
Drivel - is that like snivel?
Looks like the New World Order has just been clearing its throat up
to now. They've got funding for the main event, whatever that is.
the Rothschild hand is, quite unsurprisingly, much in evidence:
http://www.arcticbeacon.com/23-Mar-2006.html
Illuminati Cash "Slush Fund" Estimated At 65 Trillion Dollars;
Illegal Federal Reserve At Heart Of Problem As Minnesota Judge
Allegedly Poisened In 1969 After Ruling Against Corrupt Banksters
The New Underworld Order's bank accounts are used for bribery,
murder and corruption world wide as private Illuminati-controlled
bankers make money out of thin air. European investigators trying totrace the illegal funds, say the Illuminati's Global Security Fund
needs to be stopped and is the difference between freedom and
slavery in America.
here's a little-known and disturbing fact: the bureau of land management, army corp, and usgs issued studies as far back as the 1950s, and later updated in the 70s, 80s, and 90s, stating that the total population carrying capacity of the phoenix basin was/is 2-2.7M people, 1M in tucson, and 2M in vegas. we've hit the carrying capacity within the recent decade, and that's it. look at the dams/reserviors and the colorado river. it's over, folks.
moreover, although not reported widely in the press, the SW US is likely in the early phase of a "mega-drought" epoch, not unlike the cyclical episode that saw the end of the anasazi civilization, as well as the demise of the maya. this drought could last several "centuries".
within the next 10-20 years, these metro areas will see widespread water rationing, soaring costs of water, water wars, and eventually massive out-migration literally by the hundreds of thousands of people, devastating the economies of metro areas and the region.
advice: sell and leave before the mob begins migrating and you can't sell. there will be nothing like it in US history, not even the dust bowl and okie out-migration from the plains.
those in the US SW cannot say you were not warned in time. go now!
but the probabilities suggest only 1 in 100 or as many as 5-8 in 100 will heed the advise and leave in a reasonable period, whereas the vast majority will stay until it's too late and face the dire financial, economic, social, and political consequence of frightful mega-drought conditions.
good luck to all.
excellent post hydro guy!!
unfortunately my x thinks that all is well and she is staying here with our two kids.
hey she just got some new melons - her world is great.
I have to deal with racist ANONs and posters with zero clue regarding what you just posted.
You are so right!!
Get ready for the Desert Death March to be splashed on CNBC and Fox.
Paintblot-
Rule #1 in financial investing:
Past performance does not guarantee future results.
Rule #2: I think Rule #1 pretty much covers it.
the gold market is no more manipulated than the sugar, auto parts, kiwi, stock, treasury, porn, or beanie baby markets. please!
Nothing new here, it has been a well know fact for many years. Greenspan even spoke about it in testimony to Congress. Yes, it came straight from the horse’s mouth!!!
"Central banks stand ready to lease gold in increasing quantities should the price rise."
Alan Greenspan in his July 24, 1998 testimony to Congress Click Here
Haaretz has a nice article covering the story and the legal battle initiated by GATA here
how do you guys do the "here" and "here" thing link?
Richard, here is the HTML anchor tag format, just replace the ?’s with an <
?A HREF="http://www.kitco.com"> Click Here ?/A>
Don't forget cities like Denver and Colo Springs. They have been sucking water like crazy out of the main aquifer on the Eastern slope to water lawns and wash cars in all those new subdivisions. Wells are starting to dry up for people in the hills west of Denver, and farmers out East are starting to grumble. Throw in a cyclical drought and there is surely going to be a reckoning.
Out on the western slope folks are talking about storing water from the Colorado River that runs into AZ and CA. Those two states have been using far more than their allocated volume for decades, and it's within Colorado's rights in the water agreement to restrict the downstream flow.
Here in the West whiskey is for drinkin' and water is for fightin' over.
The bursting of the housing bubble will murder commodities, including gold.
Deflationary environments - which IS what will happen - means fewer dollars will buy more stuff, including gold and silver.
The bursting of the housing bubble will murder commodities, including gold.
not when oil is $300
"Don't forget that the banks act as the government spies if you withdraw $10,000 or more in cash."
Wrong. It's now $3,000, or any sequence of transactions that may total or exceed that amount.
You people need Prozac. And maybe a real college education.
The world is not ending.
China is not collapsing.
Gold is not going to make you rich if you're poor, since anyone dumb enough to be poor after the past 15 years of generally good economic activity is a retard.
The world seems to be doing quite well, housing bubble or not.
There are always LOSERS who are embittered and like to swap scare stories about "the big collapse."
Fact is, many of us are doing quite well these days, and are less succeptible to economic turmoil than the LOSERS are.
This blog used to have some interesting points, but it has become a gathering place for malcontents and angry people who let prosperity pass them by.
If you're not rich by the time you're 30, then you've lost the game, so quit being sore losers. Go to work, pay your taxes, and shut up. That's all that's asked of you. Your elaborate fantasies about the system falling apart are just fantasies.
Last ANON - you my friend are the sole reason this world and its inhabitants are in terminal collapse.
one word...
greed
The War on Terror should begin here! I am reporting this terrorist site to the FBI.
I would feel much better if the USA did not have to borrow billions everyday just to pay its bills. Silver and Gold have been the universal currency for thousands of years, even in the Bible its money, but the dollar has only been almighty since WWII. You should have between 5 to 10% of your money in silver and gold. Forgive me, but while I believe in traditional investments like government bonds over gambles like Wall Street Casino, owning silver and gold gives me real wealth.
Without fuel they were nothing. They built a house of straw. The thundering machines sputtered and stopped. Their leaders talked and talked and talked. But nothing could stem the avalanche. Their world crumbled. The cities exploded. A whirlwind of looting, a firestorm of fear. Men began to feed on men.
On the roads it was a white line nightmare. Only those mobile enough to scavenge, brutal enough to pillage would survive. The gangs took over the highways, ready to wage war for a tank of juice. And in this maelstrom of decay, ordinary men were battered and smashed.
Except for one man armed with an AK-47, and a Honda full of silver.
to the posters about water rights in the west. I work in Denver Water operations and the legal side of things is something Im seeing on a daily basis out here. Basically goes back to 'the water compact of 1922' or some year way back when, Im a little new to Western water rights law. Anyways argument boils down to Colorado having most of the rights to the Colorado river but for the last 50 years or so the rest of the SW has been using most of it. Now that the Front range is becoming more populated those rights are being used. Expect water utility bills in the arid regions to go way up in future years. Say what u want about real estate, water access/supply is definitely a 'regional/local' issue
http://www.joebagea nt.com/joe/ 2005/04/back_ to_the_anc. html
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