Gold: Fresh Record High
November 23rd, 2009WARNING: This is not a recommendation to buy, sell or hold any financial instrument.
$1164.
Gold and the U.S. Dollar Index typically describe an inverse relationship. When one goes up the other usually goes down. The charts below show the U.S. Dollar Index and gold as four hour candles. I have applied a 50 period linear regression channel to each chart. If you don’t know about linear regression lines, all this does is a draw a line right through the middle of the price action over a given period of time. The upper and lower lines are one standard deviation off the middle line. Traders often use this in an attempt to determine trends.
What do you notice about the linear regression channels since mid November on both the U.S. Dollar and gold?
USDX vs Gold, Four Hour
Not only are the slopes on the linear regression lines for both charts positive, the positive slope on gold is steeper than the positive slope on the dollar. I’m not really sure what’s happening here, but this isn’t going to continue for long. One of these moves is bogus.
In a sane world, the obvious answer would be that the dollar move is bogus, but, as I’ve said before, I never trade based on what I think I know about fundamentals.
The dollar has support below and gold is up in uncharted territory. My guess is that gold is going to come down in the short to medium term, but, then again, there’s nothing more delicious for the black box people than squeezing an asset higher as shorts think a top is in. I’m content to have pared down during this (possibly blow off top) phase. I’m still long about 40% of my original position—but I never thought the dollars I received as I closed out some of that gold would continue increasing in value along with the gold. This remaining gold is the “never sell” / pass-on-to-kids gold.
One final anecdote about taking profit and then watching an asset skyrocket higher: I used to hang out in a day trading chat room with other full time traders. Paring down profitable positions is a standard practice for professional traders. Anyway, one day, several traders had profit on a trade and some had dumped it all, while others were holding out for more. The thing gapped higher again.
Someone said they were thinking about getting back in.
Another guy wrote something like:
“You’re not going to see anything more from me for a while because I’ve just asked my wife to duct tape my hands to my desk so I can’t trade again.”
If you’re looking at that gold chart going vertical and hearing those Satanic voices in your head saying things like, “I’m missing out! It’s just going to keep headed higher! If I had just held on I would have made ____ more,” keep the image of the trader with his hands duct taped to his desk in mind.
That thought has kept me from getting decapitated many times.
Via: Reuters:
Gold rose more than 1 percent to a record high on Monday as concerns about accelerating inflation and weak economic growth prompted investors to seek relatively safer assets, while supply concerns boosted oil and copper.
today is the last trading day for gold options with a December expiration, i see mention that there are a lot of $1200 calls. t bills went negative a point or 2 (same time the USD had a 9% spike!). lease rates shown at kitco and the LBMA are negative on some contracts, and there was backwardation on futures on friday. i don’t trade (buy and hold type), but things are potentially shaping up for an interesting week.
Hear, hear on the duct tape thing. I cashed out a large portion of my BV holdings to buy a boat. And wouldn’t you know it, the gold price immediately started heading north, just like the gold nuts have been saying. I’ve been keeping my powder dry on reentering the market, because what goes up most definitely comes down, sooner or later. But more than that, I expect that the boat (and the things I put on it) will be of more value to me than gold in a vault thousands of miles away. For one thing, it will enable my escape from the U.S. madhouse, something that’s long overdue.
I guess in the end investing is about what you believe. And I don’t believe that gold is going to $5000, or even $2000, and even if it does, you won’t like the world in which such a thing can happen very much. To me, the gold bug mentality seems very similar to survivalism, and the idea that one will be the last man standing on a pile of wealth while everyone around you is in want is deeply twisted (and hardly sustainable).
My advice, for what it’s worth, is to heed the wisdom of people like Catherine Austin Fitts and Nate Hagens (google them!). Invest what you do have in yourself, your family, and your local community, and don’t worry about getting rich.
skeevie, I think you overlook those of us who aren’t “survivalists” and aren’t in gold with a profit motive or a juvenile “haha, I’m rich and you’re not” attitude. Many of us who have heeded the warnings of a dollar collapse are simply in gold to protect what remaining savings we might have. And, we’re also buying solar panels for our homes, growing gardens, and working towards local solutions.
9/11 was the wakeup call, peak oil was the elephant in the room. That was 2004, and the messenger was Mike Ruppert.
Gold is an integral part of moving forward through the transition to a post-peak oil world. If gold DOES go to $2000 or $5000 or even higher, you’re right that we won’t like the world at that point. But it’s not like we have a choice in the matter. And, since none of us have any idea what’s going to happen, gold is certainly a safer place to park savings than fiat currencies.
Ok gold is up and out of the channel and the $ is near the bottom, just checked INO and it is at 74.485 with a printed low of 74.399.
Wow is this getting interesting.
It wasn’t my intention to ruffle feathers with that post. And I certainly don’t begrudge anyone their survival options; I’d be a hypocrite if I did. Gold did what I needed it to do, preserving my savings from the ravages of the stock market and inflation, until I had decided on a course of action to weather the coming storm. I had in mind the hardcore gold bug crowd when I wrote that, particularly the newsletter barkers hawking unlimited riches while the neighbors starve. Maybe a small cadre of the super-rich will get away with that kind of thinking (it helps if you can afford your own private army), but I think the rest of them are in for a big surprise WTSHTF.
That said, there is a very large human and environmental cost that goes into mining gold that never gets talked about, and that’s always bugged me. You say that gold is an integral part of moving forward to a post-peak world. I’m not sure that mercury and cyanide poisoning, not to mention mountaintop removal, are features of the better world some of us are hoping will emerge after mankind finally breaks his oil addiction. I much prefer Jay Hanson’s suggestion that we link the future currency to the energy supply in some fashion, i.e correlate our measure of wealth with the actual wealth of the earth (gold, in my opinion, doesn’t do that).
The duct tape turned out to be a wise suggestion. A nearly 50-dollar plunge in the gold price as I write (11-27 in the A.M.). It’s going back up, but I think we’ve had a demonstration that the current price rise isn’t necessarily the “moon shot” that so many have predicted.