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These Charts Give a Clue About Where the Gold Price is Headed

July 25, 2013 2 Comments

The price of gold has been going through an anxious bottoming period and now seems resolutely back above $1300. But what’s next?

Look at the following chart:


Basically, this chart shows the difference between commercial long and short positions. The green dots are positioned at intermediate low-points in the price of gold, which are also points where commercial net longs are at relative highs. This is no coincidence. The commercials are major players in the market. They hedge against price fluctuations rather than speculate. They reduce their short positions near significant price bottoms. If you could go back in time, the green dots would be your buy signals. This chart shows commercial short positions at the lowest point in a very long time — more than ten years. Where do you think the newest green dot will appear?

Now look at this chart, which is a little different.


This also illustrates how the falling price and increase in commercial long positions generally foreshadows a meaningful rally for gold. If I were to judge from this chart, I’d say we should expect a significant expansion of commercial longs. The price of gold should correspondingly rise. Here, the red dots are the buy signals. Where do you think the newest red dot would go?

As a conservative estimate, if we saw a rally comparable 2005 and 2008’s moves, the next phase of the gold bull market would approach $2000/oz.

This process is likely to unfold as the current business cycle matures, over the next one or two years  Then when another panic hits, gold will sell-off until central banks accelerate their monetary interventions. They will do this to fight the onset of a crushing economic depression.

— Read more at King World News —




Filed under CMR, Gold, Investments Tagged with buy signal, commercial net position, futures market, hedging, speculation

Chinese Demand for Gold Is the Real Deal, Long Term

June 17, 2013 Leave a comment

You have to see these images from China.

All these people want gold: 

— Read more at Mises.ca —




What Three Billionaires Are Doing with Their Money

June 3, 2013 Leave a comment It is interesting to contrast what the “irrationally exuberant” average investor has been doing vs. the recent activity of a few high-profile billionaires.

Richard Russell, editor of Dow Theory Letters, says that if we judge them by their recent activity, Warren Buffett, John  Paulson, and George Soros are pessimistic about American consumers. They are selling consumer-oriented stocks. This is interesting particularly from Buffett, who has been a “cheerleader for US stocks” all along.

In the last quarter, Buffett sold off a large share of consumer stocks. Berkshire’s overall stake in such investments as dropped by 21%, including significant sales of Kraft and Proctor & Gamble. He dumped his entire position of Intel. He also sold 10,000 shares of GM and 597,000 shares of IBM.

John Paulson liquidated 14 million shares of JP Morgan, and sold off his full stake of consumer-oriented Family Dollar and Sara Lee.

George Soros also unloaded JP Morgan shares, and almost all his other bank stocks as well, including Citigroup and Goldman Sachs.

These billionaires — right or wrong — are shifting to greater cash holdings and away from American consumers. In America, consumption is 70% of the economy. The billionaires seem to anticipate a hit to consumption as the economic strain on American consumers grows.

The US is Canada’s biggest trading partner. It is the world’s largest consumer. Most of the world is structured around selling stuff to Americans. If the US consumer’s situation is worsening, it creates challenges for the Canadian economy.

A nearly universal bullish sentiment is driving average investors into the American stock market. This could certainly drive the American stock market higher for some time yet. Eventually, however, the offers will start coming in with no bids, and the system will violently recoil.

— Read more at King World News Blog —




Filed under Banking and Finance, Investments Tagged with billionaires, consumer stocks, consumption, Dow Jones, George Soros, John Paulson, Warren Buffett

Are Chinese Women Smarter Than Warren Buffett?

May 20, 2013 Leave a comment

Reported elsewhere:

What do the Chinese aunties know that Warren Buffett doesn’t?





We Are Close to the Top of the Market

May 17, 2013 Leave a comment

Here is The Economist‘s May 11 cover. 



When Will Interest Rates Rise?

May 7, 2013 1 Comment

Are we so sure they aren’t rising now? 

“The yields are too low.”







