Sunday, June 14, 2009

Millennialism in the 13th Century

great post this morning by Gary as a follow up of sorts to my last post:

http://biiwii.blogspot.com/2009/06/nftrh37-out-now-long-post-to-purge.html

and also this morning I got a couple more notes from the esteemed reader (and I use the word with upmost sincerity -- the fellow is extremely bright and has been very supportive of me - and Gary - for a long time) who I quoted in the last post:


On Sun, Jun 14, 2009 at 7:46 AM, [redacted] wrote:
>
> And I am certainly not criticizing your or Gary's work. Far from it. I
> devour it every day, which can not be said for my reading of Sinclair, but I
> get periodic email notices from him, as a former shareholder in TRE. I just
> was looking for what your issue was with Buckler's misuse of the TA pattern.
> Whatever you choose to name that pattern, does it not depict two attempts to
> break through the $1000, a resistance level everyone will concede (all round
> numbers like that are resistance levels), turned back buy selling?
> And BTW $940 is anything but a loss to those who got in at $450. The long
> term price of gold curve from 2000 speaks for itself. Playing the bounce
> since November was a good play for new money, but would be a capital gains
> disaster for long term holders who were not shaken out by the down draft in
> October or by any other correction along the way, and there have been some
> horrifying corrections, notably 2006. For those who believe in the logic
> that you can't print gold, and the chickens of running mega deficits in the
> federal budget have to come home to roost, the grip on gold in unshakable.
> The worst that can happen is that you end up with gold. Not bad.
>
> On Sun, Jun 14, 2009 at 8:16 AM, [redacted] wrote:
>>
>> Remember, my email to you contained two sincere questions: "First re the
>> Buckler "reverse head and shoulders," the question was, "Is that what the
>> bitch is about?"; And second re Sinclair the question was, "Is this
>> completely off the wall?" I realize that Buckler has misused the standard TA
>> formation to emphasize a possible upside breakout. And I realize that
>> Sinclair get his notions from the tea leaves of having been a gold trader
>> for 50 years. Truthfully, these are in themselves not idiotic qualifications
>> for expertise in the field.
>> Both of them are talking about the gold $1000 level and the market's
>> attempts to break through that level. It is clear in the divine light of
>> reason that the market has already made 2 attempts to break through the
>> resistance at the $1000 level. Is it likely that it will never penetrate
>> that resistance, given the obama 2 Trillion per month deficit spending
>> program already undertaken so far?
>>


first off, I kinda take issue with this statement: "Whatever you choose to name that pattern, does it not depict two attempts to break through the $1000, a resistance level everyone will concede (all round numbers like that are resistance levels), turned back buy selling?"

well... if you are just looking at the spot price, perhaps, though even there it depends on what basis you are looking at. basis PM Fix, Gold fixed above $1000 three days in a row in March 2008 and has since been repelled on three different occasions in the 980s.

basis spot or near month futures, the metal hit a high of 1033.90 in March of '08, then hit 989.60 that July, then hit 1004.90 this February, and the latest high came in at 990.30

but then there is one more way of analyzing Gold, which is to use a distant futures contract. the price movements of a far out contract take into account the 'real' return of Gold since it prices in prevailing interest rates. here is a chart of the December 2009 Comex contract:



so far here all I see is a series of declining tops (or higher lows since we are looking at it upsidedown). the top price for GCZ09 in March '08 was 1060, then there was 1028, then 1015, and most recently 993.60.

now that Dec '09 chart could be interpreted as bullish, no doubt, but a head n shoulders it ain't. if the series of higher lows is interrupted then the bull case will gain more validity, but for the moment it shows me the market's propensity to accept incrementally fewer Dollars per ounce of Gold on each occasion.

as I have said over and over, I believe the Gold/Dollar exchange rate is in a 'flat'. I have given a downside target for Gold (666), but I don't pretend to Know for sure that the price will hit my target or even come close for that matter. what I do Know is that I will start buying Gold again when voices as equally shrill as Mr Sinclair's start proclaiming that the 'charts' say Gold is heading for 450 or whatever.

as far as the end game goes, I am more bullish on Gold than Sinclair and probably most of the other loud voices in the Gold Community. but this here is not the end game (in my opinion) or even the 7th Inning Stretch. this is like inning 3 or 4 of one of the greatest games ever played.

in other words we are in the midst of Wave Two of a massive Five Wave super-duper bull market in Gold (paper asset bear market).

hold yer 450 Gold tight as you can and enjoy the show.