Friday, January 14, 2011
Gold, Part 2
Gold bugs who have been root root rooting for the home team along side silver bugs, copper bugs, oil bugs and stock tout bugs are right about now getting past nervous and on to revisions. It is the wash, rinse, repeat cycle my friends; look like a champ while the trend lasts and then revise...
Here is the chart from the gold article that inspired the following comments as it was reproduced at SeekingAlpha, haven for contrarian analysis. From NFTRH118, some of the comments [with my thoughts]:
“Good luck with your USD longs - you'll need it! All fiat currencies return to their
natural worth. Paper.” [USD longs will be put to good use]
“I think you have to say what you really mean. I think you don't want to say that fear has
entered your investment analysis. Remembering that fear is an emotion, and emotion is
an investor's worst enemy.” [Fear always enters my analysis when you are brave]
“Technically; this isn't even anywhere near a correction - and we're $300 bucks up on
this point last year.” [From your lips to God’s ears, but…]
“Agreed. Silver supply is VERY tight. It has been reported by Sprott that they have finally
been delivered their physical silver, for their newly created PSLV after waiting since
purchase in early Autumn.” [What do I know, I am usually wrong on silver. :-)]
“If you think Gold's correcting, how much? -10 -15% decline isn't even a Seasonality
shocker, you shouldn't be "playing" Gold if you don't already know that.” [I hear ya]
And my personal favorite, from a Seeking Alpha contributor (writer) who once
approached me with a deal to ‘follow’ me if I will ‘follow’ her. I declined, as this
appeared to be in conflict with her self-proclaimed devotion to ‘meritocracy’.
“In any case, this latest bout of Dollah! Dollah! Dollah! Baby Gaming has been
especially disturbing because it's been so transparently contrived. Listen to any of the
Gold Baiters and Haters as they mouth their scripts right now. They can hardly read
them without flushing bright red, stammering, and having their voices go up two octaves.
They're like abject amateurs in a high-school play. Or - as we've said before - yapping
The chart, for those keeping score at home? MACD weekly triggered down from over bought. RSI on the way down from over bought but still well above support at around 50. And STO having bearishly declined below 80. Good stuff, because we are finally getting rid of the momo's, pumpers and 'to da moon' flight captains.
I am always more bullish in gold when the company thins out, and that is what is happening now. The gold-silver ratio has a chance to really do some damage and get the precious metals herds scattering first and with any luck, the entire casino rushing for the exits before too long. But for now, precious metals bulls are pretty much alone in the house of pain.
The most obnoxious outcome for me personally would be that policy makers win, are able to create a lasting economic rebound out of nothing but debt issuance and money creation. It would be obnoxious because it would be created out of dishonesty and would imply that powerful people can manage the formerly free market at will. Of course, I do not expect this to happen, but patience may be required in trying to rein in the pig. If history repeats, the GSR will act as something of a credit spread, as Bob Hoye would say. It would indicate the contraction in the spread between the speculative party and conservative, sound thinking.
The GSR, if it is indeed bottoming and turning up, should take down all parties with the first to be taken down, the gold sector, eventually becoming the first to recover. Just like out of the 2008 destruction.
Here's the updated chart showing a fattened pig, vulnerable to a would-be rise in the GSR. On a risk vs. reward basis, the gold stocks are the best bet going forward. But until near term events sort out, the going would be rough there as well and protection of positions is the way to go. In my opinion, 2011 stands a chance to be epic, but it is not going to be as easy as 2010. Put your thinking caps on and remember that the loudest voices at any given moment are probably the ones telling you to do the opposite of what might be in your best interest. http://www.biiwii.blogspot.com