Why Gold Could Still Triple From Here
By Josh Lipton Nov 04, 2009 3:30 pm
Strategists expect the yellow metal to move even higher.
More impressively, strategists note, gold prices moved higher on Tuesday even as the S&P 500 ticked up two points and the DXY index modestly rose to 76.3.
What has triggered this headline-making move in the gold price?
For one, the International Monetary Fund reported that it had sold to India 200 of the 403 tonnes it wants to sell this year. All that remains, market pros note, is the prospect for the other 203 tonnes to be sold, with speculation upon China as the eventual buyer.
But strategists point to another, perhaps equally important reason for gold’s surge: fiscal policy in the USA.
Specifically, Peter Orszag, the Administration’s Director of the Office of Management and Budget (OMB), delivered a speech yesterday morning at New York University, in which he said that the federal deficit during the current fiscal year will match last year’s record high of $1.4 trillion. But he continues to predict the administration will cut that in half by the end of President Barack Obama’s first term.
Is there a relationship between the price of gold and the US federal deficit and the amount of US public debt outstanding?
Apparently there is, says Ed Yardeni of Yardeni Research.
In a client note this morning, he notes that the price of gold has tended to lead the US federal deficit since the 1990s. The 12-month deficit peaked during the previous decade at $332.1 billion during April 1992. It then turned into a surplus of $277.8 billion during April 2001, on a 12-month basis.
During the previous decade, the price of gold peaked at $414.80 on February 5, 1996, Yardeni points out. It fell to $255.95 on April 2, 2001.“It then took off without much downside volatility to yesterday’s record high,” Yardeni emphasizes. “As gold soared, the federal surplus evaporated and turned into a structural deficit that Orszag’s OMB projects at $9 trillion over the next 10 years.”
The investment strategist concludes: “So why did gold rally so much yesterday despite Mr. Orszag’s assurance that the federal budget deficit will be cut in half? Apparently, the gold bugs don’t believe him.”
All this red ink bleeding out of Washington is certainly causing a lot understandable hand-wringing.
The American Enterprise Institute for Public Policy Research (AEI) published a paper indicating that “by all relevant debt indicators, the US fiscal scenario will soon approximate the economic scenario for countries on the verge of a sovereign debt default.”
Steven Hess, Moody’s lead analyst for the US, put it this way on Reuters TV: “The Aaa rating of the US is not guaranteed. So if they don’t get the deficit down in the next three to four years to a sustainable level, then the rating will be in jeopardy.”
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2009-11-04 15:47:59
gold
I am a gold bug of sorts.
However, I am always amazed at the number of positive articles when it is reaching new highs and negative articles when it is going lower.
I have to fight my animal instinct to add when it is up and sell when it is down.
However, I am always amazed at the number of positive articles when it is reaching new highs and negative articles when it is going lower.
I have to fight my animal instinct to add when it is up and sell when it is down.
2009-11-04 17:55:35
Gold triple from here?
No doubt about it, as long as your time horizon is unlimited.
Riddle me this; do we see $1200 before a revisit to $1000?
When everyone tells you how sure they are, and how easy a trade it is, you'll be sure to find the financial bullet you didn't hear. Right in the wallet.
Kidding...well sort of.
Riddle me this; do we see $1200 before a revisit to $1000?
When everyone tells you how sure they are, and how easy a trade it is, you'll be sure to find the financial bullet you didn't hear. Right in the wallet.
Kidding...well sort of.
2009-11-04 21:25:51
Gold cycle point coming
late Nov -early Dec should be a great buy point....eventually people will need to be careful with gold, though : FDR cracked down on gold in the 30's, and I would not be surprised to see them try that again this time around, in lieu of responsible monetary and fiscal policy
Prechter the Elliott Wave guy sees a huge drop in gold coming within 1-2 years or so.
I am not a currency expert, but folks need to check Einhorn's facts on what happens to gold in a currency crisis (shortly after a crisis peaks, gold collapses along with all other financial and nonfinancial assets). A dollar crisis would cause the dollar to skyrocket.
Prechter the Elliott Wave guy sees a huge drop in gold coming within 1-2 years or so.
I am not a currency expert, but folks need to check Einhorn's facts on what happens to gold in a currency crisis (shortly after a crisis peaks, gold collapses along with all other financial and nonfinancial assets). A dollar crisis would cause the dollar to skyrocket.
2009-11-05 11:13:19
GOLD/USD
Just a few notes going forward. When talking about currency worth no one ever dare mention the $1.4 Quadrillion in OTC worthless derivatives out there. What currency is going to gurantee all those contracts? What country? Before 1971 the USD was linked to GOLD. Also how can anyone even want to invest in any company that uses DERIVATIVES? YAMANA,BARRICK,NEWMONT&KINROSS all just took billions in losses. The best gold business model going forward is the royalty business. They are not mining companies. They prospect for gold and collect a sliding royalty as GOLD goes up with little downrisk with cost. ROYAL GOLD has 12 employess and reports record profits for example.
2009-11-05 11:17:55
Gold cycle point coming
Elliot wave and there scribbly lines never looks out the window at the many flash points that are out there. Fundementals are thrown out the window. Did ELLIOT see the DEBT CRISIS? Last time I looked fundementals always prevails. Capital flows to where there is FREE MARKETS unlike here in the USA where there is no rule of law. Blaming the FED for all this is nonsense. Its the CONGRESS and there reckless spending. 5000 years of history will tell where that will lead you. Ignore it for slef interest and you are doomed. We will be no different.
2009-11-05 13:54:01
Gold cycle point coming
It si the congress. We need to get them to www.RevokeTheFed.com
2009-11-05 14:34:54
Gold cycle point coming
Actually, EW forecasted the debt crisis before just about anyone. Have a look at that 2002 print date of Conquer the Crash. Read that book and I think it will at least make you think twice about the culpability of the FED.
Another correction: EW is based almost in full on looking out the window at the flashing lights. EW is based on the swinging pendulum of social mood and the sentiment levels which accompany the extremes.
I believe Gold has a 91% bullish sentiment right now. I can't help but believe that a top is near.
Another correction: EW is based almost in full on looking out the window at the flashing lights. EW is based on the swinging pendulum of social mood and the sentiment levels which accompany the extremes.
I believe Gold has a 91% bullish sentiment right now. I can't help but believe that a top is near.
2009-11-05 16:56:38
GOLD
If Elliot wave is your cup of tea then surely you may of read Alf Field and his EW predicitonsas follows:
Major ONE up from $256 to approximately $750 (a Fibonacci 3 times the $255 low);
Major TWO down from $750 to $500 (a serious decline of 33%);
Major THREE up from $500 to $2,500 (a Fibonacci 5 times the $500 low);
Major FOUR down from $2,500 to $2,000 (another serious decline);
Major FIVE up from $2,000 to $6,000 (also a 3 fold increase, same as ONE)
The history of the FED dates back to early 1900's. Its original creation came out of the sunken GOLD ships,Dust Bowls and earthquakes in Cali. The Gold was in the west and the banking was in the east. In 1913 it reason was to stabilize cpaital flow in and oout and around the country easier. Not control INFLATION and the ECONOMY. Today like in all history POLITICIANS are to blame fro reckless spending and ignoring history all together where self interest rules the day. Which in turn has destroyed currencies and country's over and over again. Its the DEBT. A 5 yo with a pocket calculator can figure out we are only paying the interest. CONGRESS does the spending. The FED is left to sort it all out. Of course they would love to raise Interest rates but there very existence depends on the ADMIN & CONGRESS letting them do just that. As easy as it was to create them they can be erased. This is why audit the FED bill has been allowed to progress forward.
Major ONE up from $256 to approximately $750 (a Fibonacci 3 times the $255 low);
Major TWO down from $750 to $500 (a serious decline of 33%);
Major THREE up from $500 to $2,500 (a Fibonacci 5 times the $500 low);
Major FOUR down from $2,500 to $2,000 (another serious decline);
Major FIVE up from $2,000 to $6,000 (also a 3 fold increase, same as ONE)
The history of the FED dates back to early 1900's. Its original creation came out of the sunken GOLD ships,Dust Bowls and earthquakes in Cali. The Gold was in the west and the banking was in the east. In 1913 it reason was to stabilize cpaital flow in and oout and around the country easier. Not control INFLATION and the ECONOMY. Today like in all history POLITICIANS are to blame fro reckless spending and ignoring history all together where self interest rules the day. Which in turn has destroyed currencies and country's over and over again. Its the DEBT. A 5 yo with a pocket calculator can figure out we are only paying the interest. CONGRESS does the spending. The FED is left to sort it all out. Of course they would love to raise Interest rates but there very existence depends on the ADMIN & CONGRESS letting them do just that. As easy as it was to create them they can be erased. This is why audit the FED bill has been allowed to progress forward.
2009-11-24 16:51:10
GOLD
Brian - I'll check out Alf - thanks for the tip. The prediction looks a little too simple, but you never know when forecasting.
Agree with your assessment of the FED. It is a shame what is happening to our country.
Agree with your assessment of the FED. It is a shame what is happening to our country.
2009-11-24 17:39:33
GOLD
Jason,
It's just seems funny to me that even at my local coin club for the last few years Elliot wave guys were constantly predicting Gold to go down to $400 and it never happened. There is a stronger force out there that we need to all embrace and that is there is a serious big pile of paper being created out there by CB's. There is no such thing as draining liquidity. That is world class BS. Withdrawing QE sends the world inot a the great depression just like asking for a higher dollar does. It's not going to happen. We are looking at a serious problem when ti comes to Derivatives with no practical solution except QE to ifinity. Gold will rise much farther and stay higher and not come crashing down like it did in the 80's. In the Weimer Republic equities went to infinity as the currency went ot zero both imploded. Gold was then used to place confidence back into the Reichmark. One other issue you have is that NO country has ever paid it's debt off in all of history. What makes us think that the USA has some grandioso plan to do so. Surely GOLD does not think so.
It's just seems funny to me that even at my local coin club for the last few years Elliot wave guys were constantly predicting Gold to go down to $400 and it never happened. There is a stronger force out there that we need to all embrace and that is there is a serious big pile of paper being created out there by CB's. There is no such thing as draining liquidity. That is world class BS. Withdrawing QE sends the world inot a the great depression just like asking for a higher dollar does. It's not going to happen. We are looking at a serious problem when ti comes to Derivatives with no practical solution except QE to ifinity. Gold will rise much farther and stay higher and not come crashing down like it did in the 80's. In the Weimer Republic equities went to infinity as the currency went ot zero both imploded. Gold was then used to place confidence back into the Reichmark. One other issue you have is that NO country has ever paid it's debt off in all of history. What makes us think that the USA has some grandioso plan to do so. Surely GOLD does not think so.
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