With everyone so caught up in Gold’s rise, let’s take a look at another precious metal: Silver:
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click for ginormous chart
Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data, ability to repeat discredited memes, and lack of respect for scientific knowledge. Also, be sure to create straw men and argue against things I have neither said nor even implied. Any irrelevancies you can mention will also be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.
Faced with the choice between changing one's mind and proving that there is no need to do so, almost everyone gets busy on the proof. —John Kenneth Galbraith
Knowing that the vote over the weekend in Greece was really a referendum on Euro membership, a majority of the Greek Parliament said yes to staying. European Finance Ministers meet again on Wednesday to solidify the 2nd bailout package for Greece at the same time hopefully a deal is consummated between Greece and its creditors this week. The Greek 14.5b euro bond that matures on March 20th is up by 2 pts. The optimism that all will be completed and contained AGAIN to Greece has yields lower in Portugal, Spain and Italy. The iTraxx Financial Index is also narrower by...
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September 8th, 2009 at 1:14 pm
SLV and GDX are both likely to outperform GLD over the next 12 months.
September 8th, 2009 at 1:18 pm
http://www.incakolanews.blogspot.com/
Very interesting post on gold price relative to other currencies del Mago del Sur- Otto Rock.
September 8th, 2009 at 1:25 pm
Count me in as one of those who don’t “get” chartists…I understand the value of charts in helping identify some patterns, but don’t know how to make sense of it until after all the moves have been made.
I just knew when silver was at 9-14 dollars, it was undervalued relative to its rarity and functional use, so I got what I felt was a necessary amount to have for physical reserves for myself. I’m a believer in the theory that if the government won’t go onto a precious metal standard, there is no reason that I shouldn’t put myself on it. I like the notion of having some hard assets and some foreign currencies in case the dollars does take a major crap.
September 8th, 2009 at 1:28 pm
I feel like I have a handle somewhat of the dynamics of the gold and silver markets, but seriously, WTF is up with oil today? I guess it’s a dollar weakness trade, but this is crazy….
HCF
September 8th, 2009 at 1:34 pm
investorinpa @ 1:25
AUD, BRL and NOK are looking good.
September 8th, 2009 at 2:04 pm
David Singer…you read my mind…been thinking about silver more often lately and even worked up a chart on it myself. The move off the lows from the $8 handle is clearly corrective in nature and suggestive of a big leg down coming….see limited upside in Silver….
http://andystechnicals.blogspot.com/2009/09/forgotten-metal-silver.html
September 8th, 2009 at 2:06 pm
hmm, since nobody is taking this side in any of the comments, while SLV looks very bullish near term, I’d say in the next 12 months you will see the October lows violated in the metal so I’ll call for $8 or below for Silver. I expect Gold to return to it’s October 08 lows as well but silver will move faster than gold to the downside. Near term gold should cross the 1033 high and I’m thinking that should be enough to get the momentum players and home gamers to do more buying and push it to near 1,100.
No need to tell me how wrong I am, everyone is/has already taking the other side of this trade.
September 8th, 2009 at 2:41 pm
You shall not press down upon the brow of labor this crown of thorns, you shall not crucify mankind upon a cross of gold. Not even from American monkeys, but from old world monkeys. And your little dog, too.
September 8th, 2009 at 3:01 pm
@2.41 William Jennings Bryant and the Wizard of Oz….
The more things change, the more they stay the same….tensions between the “monied” class and the peasants always resurface, don’t they?
September 8th, 2009 at 3:07 pm
ben22 @ 2:06
“No need to tell me how wrong I am…”
Oh, but I can’t resist.
If and when Bernanke ever gets serious about heading off commodity inflation, we can expect a significant pullback in silver. But I don’t see that happening in the next 12 months.
However, after the NEXT bubble bursts, anything is possible.
September 8th, 2009 at 3:13 pm
@Andy T
Andy, I think you’d appreciate this (and I’m sure you have already looked at it)…
Earlier this summer, from $12.27 the SLV rallied to $13.85, then pulled back to $13.06 (a 50% retracement – it actually went to $12.97, but I’m looking more at the final print on the 60 min. charts)…
Then, it rallied to $14.80 (which was just shy of 161.8% of the $12.27 beginning)… It pulled back and re-tested at 78.6%…
The most recent rally has taken it precisely to 261.8% from the $12.27 jump off point…
September 8th, 2009 at 3:14 pm
Andy T Says:
Along with the perennially populist ‘men behind the curtain’ conspiracies. Bryan somewhat recanted in his later years, allowing that new sources of gold supplementing the money supply effectively stole his thunder, redressing the sources of angry support.
September 8th, 2009 at 3:29 pm
DL,
I put that line in on purpose HOPING someone would start a discussion here. The investment strategy posts on this site have been… lacking as of late.
I know you are on the other side so I appreciate your perspective.
Still in the deflation camp here, which is the starting point for my thesis on Gold and Silver.
I wish you’d use something other than the Fed argument though. My thoughts are the same as always on the Fed and our saviour Bernanke:
Bernanke certainly doesn’t have any control over anything imo. To assume the Fed is “in-control” would assume also that people are machines and that social mood is predictable. Is it a certainty that social mood is so positive thanks to the stock market rally that households will simply lever up further, banks will lend and so will investors? I do not think that is the case, the public, regular people, have been shaken, and with u-6 at nearly 17% the feeling of optimism that allows one to have some level of comfort when increasing the household debt load is not widespread enough from my perch. Even with handouts many that “got in” on CFC have buyers remorse already. The path of “debt” has been chosen as our way out of this and I don’t think the odds are very high that after the largest delevering since the GD (which was not even noticeable in our debt/gdp) we will simply re-inflate after several quarters right back to “normal”.
further, The Fed showed how much control they had last year when the worked overtime to provide “liquidity” and we still crashed. You can’t beat deflation in a credit based system, but that doesn’t mean BB won’t try, or that after a few months of a trend change that people would believe that what they did worked/was working.
September 8th, 2009 at 3:32 pm
@DL,
Think I already know, and in relation to this post, where is the dollar going iyo?
thanks.
September 8th, 2009 at 3:38 pm
ben22 @ 3:29
“Bernanke certainly doesn’t have any control over anything”. I would agree that he doesn’t have “control”. But he does have a very powerful instrument, however blunt it may be. Central bankers around the world are desperately trying to inflate another bubble. But, in partial agreement with you, I don’t think it will look exactly the same as the last. I would agree that credit growth in the private sector will be sluggish (although plenty robust at the Federal level), and so real estate won’t be performing any great acts of levitation. At the same time, however, Bernanke and the Europeans are all trying to trash their currencies… and all of the money that they’re creating has to go somewhere.
I expect to see plenty of action in commodities, precious metals, and currencies of commodity-based countries.
September 8th, 2009 at 3:47 pm
ben22 @ 3:32
Where’s the dollar going?
I assume that you’re referring to the USD relative to the currencies that make up the dollar index. The answer to that question, however, doesn’t tell the whole story.
How about the performance of USD relative to the currencies of countries like Australia, New Zealand, S. Africa, Brazil and Norway?
September 8th, 2009 at 3:50 pm
dl says-
“At the same time, however, Bernanke and the Europeans are all trying to trash their currencies… and all of the money that they’re creating has to go somewhere.”
but if the industrial production in the end collapses- after build-up of inventory- and the US consumer does not return to borrow and spend counsuption patterns- as it appears the world is awaiting- then-
commodities would have to collapse- no?
September 8th, 2009 at 3:53 pm
@DL,
I would describe you as being very in-line with Faber’s views then. Great deal of respect for Faber here. I have just drawn a different final conclusion about the outcome.
September 8th, 2009 at 4:01 pm
call me ahab @ 3:50
“if the industrial production in the end collapses … and the US consumer does not return to borrow-and-spend consumption patterns- as it appears the world is awaiting- then- commodities would have to collapse…”
Certainly, the lack of credit expansion in the private sector (that we both envision) will be a mitigating factor in and of itself. But governments, particularly among the G7, are doing a pretty good job of making up the slack… and when you combine that with the growth of money, I think that USD, GBP and EUR will decline relative to commodities, rather than the other way around. The “smart money” will want to go where value will be preserved, if not augmented.
September 8th, 2009 at 4:01 pm
DL,
just asking about the buck in general. My review remains that while not a perfect +1/-1 the dollar and everything else is still one giant trade, especially when one considers how much dollar based debt floats around out there.
September 8th, 2009 at 4:01 pm
following on my 3:50 post-
from yahoo finance-
“Consumers slashed their borrowing in July by the largest amount on record . . .The magnitude of the drop surprised analysts. Some thought the Cash for Clunkers program — which began in July and aided auto sales and car loans — would have blunted cutbacks in other lending areas.
September 8th, 2009 at 4:03 pm
@DL
“and all of the money that they’re creating has to go somewhere.
I expect to see plenty of action in commodities, precious metals, and currencies of commodity-based countries.”
Re: consumer credit
http://www.bloomberg.com/apps/news?pid=20601087&sid=anUy8clF_AVk
—
Why doesn’t everyone ask themselves what the END GAME is of money printing, if the only END GAME is high commodity prices?
Is it so we can all sit around and stare at $4,000 bars of gold and pretend we’re rich?
It would be different if these commodities were being consumed and price rises were necessary because of basic supply/demand dynamics…
But to pay $3+ per gallon of gas in a difficult economy where the U6 is near 17% so Lloyd Blankfein can store barrels of oil in his basement seems ludicrous.
As for Gold… If China wants it so bad, why don’t we send ‘em a few bars from Ft. Knox? As for the “China put”… How stupid are they to have a trade imbalance with the US, yet they buy gold “at the top” of a spot market when our gold hold holdings are 10x theirs…
September 8th, 2009 at 4:07 pm
@ahab
It’s not just that they slashed their borrowing… They were FORCED to (as most major card lending institutions have progressively cut credit lines all summer)…
Hold a $4,900 credit balance on a $5,000 limit card?… Pay $1,000 and what do you get rewarded with? Answer: a reduction on your limit to $4,000…and on and on…
Soon many are going to wake up… Start hoarding cash in tin boxes, and file for BK…
September 8th, 2009 at 4:07 pm
dl says-
“I think that USD, GBP and EUR will decline relative to commodities, rather than the other way around. The “smart money” will want to go where value will be preserved, if not augmented.”
would you still hold that view- if we enter a truly defaltionary environment
September 8th, 2009 at 4:10 pm
OT Funny Anecdote re: Gold at Fort Knox.
My cousins husband was an MP at Ft Knox for two years a few years back before he went to Iraq. When I asked him straight up last week:
“so whats the deal? is there really even ANY gold at Ft Knox?” (just because I had read some shit a bit before that that claimed there wasnt any)
He replied:
“man… not a single person that I ever met or worked with there that I talked to, knew anyone who had ever worked at the gold vault.”
Just thought that was strange.
September 8th, 2009 at 4:10 pm
cvienne @ 4:03
“But to pay $3+ per gallon of gas in a difficult economy where the U6 is near 17% so Lloyd Blankfein can store barrels of oil in his basement seems ludicrous”.
I think that Obama is willing to pay that price if it means that job growth will be greater over the next three years as a result (of the easy money).
September 8th, 2009 at 4:15 pm
@DL
Easy Money is costing jobs… Plain and simple…
September 8th, 2009 at 4:17 pm
cv says-
“Is it so we can all sit around and stare at $4,000 bars of gold and pretend we’re rich?”
no kidding- because if gold goes that high- i am thinking economies are collapsing all around- with the very fabric of society ready to tear apart- and your goal then may be only to protect your life and your gold- because there is no-one left who cares that you be protected
cv says @ 4:07
“Soon many are going to wake up… Start hoarding cash in tin boxes, and file for BK…
i couldn’t agree more w/ that statement
September 8th, 2009 at 4:22 pm
@DL
“I think that Obama is willing to pay that price”…
That’s about the most hilarious statement I think I’ve ever heard…
How many think of Obama as toiling and sweating over such monumental pressure?… Really getting down and rolling up his sleeves he is…
Puhleeze!
September 8th, 2009 at 4:24 pm
cvienne,
You don’t think that Obama cares about job growth?
His re-election depends on it.
September 8th, 2009 at 4:26 pm
@DL
Sure he cares about it… The same way I care what lottery numbers come out after I’ve bought a ticket…
I guess that means that I should by hundreds and hundreds of tickets then (to improve my chances)…
After all, if I’m going to win, I’ve gotta “pay that price”, huh?
September 8th, 2009 at 4:30 pm
cvienne,
I’m not sure exactly what your point is. What matters to Obama is what happens between now and November of 2012… not what happens after that.
September 8th, 2009 at 4:34 pm
“would you still hold that view- if we enter a truly defaltionary environment”
nobody could say that in true credit deflation. in true deflation the dollar will do better than all other fiat imo. The world is awash with dollar based debt, if the debt is defaulted on or paid down faster than new debt is created the remaining banknotes increase. We have ~$52T in credit and ~$2T in banknotes. In deflation the banknotes, in real terms, will appreciate.
I get this from people all the time when I do a seminar and tell them not to be afraid to use cash in your portfolio during various times while trying to teach the power of compounding. Every single time I say it someone raises a hand and says: “but I’m not making any money in cash”
but the reality is, that cash you held last year, in March it bought you twice as much as almost everything compared to what you could get for it in March 2008.
or as Gary Schilling said with a smirk recently in an interview “I’m not buying treasuries for the yield”
given my views I’m welcoming this quote floating all over the web today about how China is promised to buy every dip seen in gold as an alternative to the $.
Anecdotes:
I have gotten 12 e-mails just today from MF wholesalers about coming inflation and several regarding gold. Pimco, otoh, has sent me information on a new Pimco ETF that tracks long bonds. Three e-mails this morning from clients that talked with someone about a penny stock that “could double or triple” by year end. I also had four people call today requesting a gold purchase. These were not exactly sophisticated investors calling for what to do with the $1,000 in the Roth IRA. One said to me “nothing else is going up” Gee, wonder what kind of convo they had over the weekend, or maybe they just happened to catch one of the 10 million radio/print/tv ads about buying gold.
September 8th, 2009 at 4:38 pm
@DL,
You thinking of buying OIH back with any pull-back in the coming months? That thing hasn’t really gone anywhere since you sold it.
September 8th, 2009 at 4:42 pm
ben22,
Over the last two months, my money has been divided among FXI, EWZ and GDX. I’m going to stay pat for now.
September 8th, 2009 at 4:54 pm
@DL
My point is this… Obama wants jobs? sure… but what has he done? He ramrodded a stimulus package through Congress back in February which has done what to that extent?
He chose Geithner, and Larry Summers as his economic leads… and reconfirmed Bernanke
The net result has been funneling money to the largest banks, who hoarde the cash and speculate on the prices for commodities & equities…
That’s it…
So how ‘jobs’ figure into his actions I’m not exactly clear on… Americans are clearly retrenching with regards to their purchases, businesses are reacting by cutting back… The banks are hoarding the cash, and soon, unemployment benefits will run out, a new wave of ARMS is about to hit, & taxes are going to go up…
So my POINT is… Sure Obama might ‘care’ about jobs, but his actions do EXACTLY what will continue to ‘bleed’ jobs going forward…
It’ll keep Lloyd Blankfein & Jamie Dimon’s maid service in full employment though.
September 8th, 2009 at 5:09 pm
cvienne @ 4:54
I personally disagree most of what Obama has done so far.
But with respect to his re-election, I think that what he has done makes a lot of sense. His principle constituents are (a) people earning less than 60K/year, (b) union members within the manufacturing sector, and (c) Nancy Pelosi.
While the Republicans are going to gain seats in 2010, I wouldn’t bet against Obama winning re-election in 2012.
And as for the “inflation” issue, the core CPI is going to lag the price of oil and gold to a considerable degree; it may still be “contained” in 2012.
September 8th, 2009 at 5:18 pm
b22 says-
“but the reality is, that cash you held last year, in March it bought you twice as much as almost everything compared to what you could get for it in March 2008. . . .or as Gary Schilling said with a smirk recently in an interview “I’m not buying treasuries for the yield”’
good points
September 8th, 2009 at 5:23 pm
@DL
I’m not making any statements with regards to “O”‘s chances in 2012…
As of now, he still seems to be a popular guy. As long as that continues (and unless someone else can gain a similar measure of popularity), he’ll likely get re-elected…
But I’m sick of that talk already… I’m not interested in a POPULAR President. I’m interested in a President who can help usher in institutional change for the long term betterment of this country…
Obama is doing nothing along those lines… In fact, his policies thus far, seem to be pointed in the direction of exacerbating what he himself describes as the problems he “inherited”…
In the long run he is a “non-entity”… A basic occupant who keeps the seat warm… Whether that’s for 4 or 8 years doesn’t make much difference…
September 8th, 2009 at 5:29 pm
Hard to say if O gets re-elected, perhaps not, but in many years I do think politicians like him will be extremely popular, maybe 25 years from today. Observe from the Socionomics Institute:
South Sea Bubble: Adam Smith, 1759 The Theory of Moral Sentiments
Panic of 1825: Karl Marx ‘The Poverty of Philosophy’ 1847, ‘The Communist Manifesto’ 1848, ‘Contribution to the Critiuque of Policital Economy’ 1859
1920′s boom and bust: Headline: Socialism takes over nearly half of the earth’s population (1929-1948)
It would be important to add that these appear to be fractals when placed on a long term stock chart.
September 8th, 2009 at 5:34 pm
@ben22 – Although I think asset prices should drop in this economic environment, the market action is not confirming. Here’s a slightly edited version of a reply I posted to leftback re:gold.
What I am worried about is the risk asset price rises indicating “inflation.” We have had the inflation/deflation debate on here before, but I’m only thinking about asset prices here, both hard assets, and paper assets. The prices of these asset, not monetary phenomenon etc.
The pricing of these assets can become decoupled from the economy when governments can just print money (for their own account), or supply cheap money to “banks” who buy for their own account, or pump up cheap credit (to speculators, e.g. “banks”), and allow leverage while backstopping the institutions doing the leveraged speculations. All this is possible is a terrible economic situation.
In this way, money can be made available to buy assets for speculation, and the assets of choice can decouple from the economy: economy down, asset prices up. Gold is a prime example due to its limited economic value to the average Joe or industry. It will be priced based on “demand” which can be largely driven by speculation.
Oil is an interesting counterpoint due to the negative feedback loop to the economy. This either causes a worse economy due to higher oil prices, and high probability of prices falling, OR general inflation starts to filter into the general economy at the lower economic level due to sustained higher oil prices. I don’t know which path we might currently be on, but I’m very worried about the price action of risk assets, and hard assets. If they don’t at least stabilize soon, bonds will not likely continue to hold up. In the end, the bond market is to big for the USG to control. And general price increases will be accelerating throughout the economy. The other side is, this little bubble echo will end and prices will drop anew.
Don’t know what path we are on, but current price action could be indicating future inflation. Not a prediction, just a concern. I am actually positioned in cash for lower asset prices and better enconomic environments to invest in. This price action all seems very speculative right now, but the price action is real.
September 8th, 2009 at 5:40 pm
Well, WP ate my last post but I basically said I think in another 25 years politicians just like BO could be extremely popular and so will socialism.
Oberservations from the Socionomics Institute:
South Sea Bubble, followed by ‘The Theory of Moral Sentiments’ Adam Smith, 1759
Panic of 1825, followed by ‘The Poverty of Philosophy’ 1847, ‘The Communist Manifesto’ 1848, and ‘Contribution to the Critique of Political Economy’ 1859
1920′s boom and crash: Headline: Socialism takes over nearly half of the earth’s population. 1929-1948.
Now we have the great credit bubble: What will follow?
September 8th, 2009 at 6:22 pm
“this little bubble echo”
Is there an echo in here? Yes, the echo bubble leads to the echo crash.
ben: It really must have been a heckuva good BBQ over at BRIAN’S this weekend if JOHNNY wanted in on gold and those great 3-BAGGER penny stocks. Sounds like it’s getting late. Very late. The music will stop soon.
“Oil is an interesting counterpoint due to the negative feedback loop to the economy”
Correct. Even $80/bbl might be the trigger to shut down the consumer all over again. If we’re not there already.
September 8th, 2009 at 6:48 pm
The market is completely insane and speculation knows no limit. The commodities rally would be justified in the depreciation of main currencies ( USA and Europe are in a race to devaluate and probably China is doing the same but difficult to know). At least that is what MM will sell in the coming days or weeks until they get the new instructions.
Investing in this environment is very frustrating, totally irrational and you have to think in a no logical way to be correct.
I do not want to believe in conspiracy theories but everytme it is becoming more difficult. How can you explain that natural gas spot price has increased 30% just today. What has changed so drastically in the last hours to produce such an increase? It is difficult to understand how prices moved so low few months ago and even harder to explain what is happening lately.
This will get some rationality when nobody would be interested in stocks, bonds or commodities and then ther would be no one to foolish.
September 8th, 2009 at 7:35 pm
I saw this sentiment elsewhere and couldn’t agree more. We need a cleansing.
___________________________________________________________
“The stock market crash of 2008-2009 seems to have accomplished nothing. I was always hoping for a crash because since 1995 a speculative trader mentality infected most of society. It was seen in stocks, real estate and now again in stocks.
I was hoping for pain. I was tired of seeing the best mathematical minds join Wall St. It was saddening to see a lot of business school grads lose the desire to build great companies because the reward/effort ratio was so tilted toward the world of finance.
After the inevitable crash, I was hoping that a rational builder/owner mentality would become the norm laying a foundation for a sustainable economy and prosperity.
It didn’t happen.
This current rally feels like momentum traders are dominating once again. I feel like puking when I overhear my dentist or graphic artist bragging about how much money they have made recently by day trading.
Nothing has been learned. Nothing has changed. My gut tells me that we are being set up for an even larger crisis (whatever form that takes) in order to restore the moral order of free market capitalism.”