Gold normally goes up on Thursdays. I guess those Islamics like to buy it just before their day of worship. I sure wish America would stop spending so much money she doesn't have but my wishing won't get it done.
When this crash comes it's going to be something and those with gold will manage to eat more than once a day. Oh well, you seen one Great Depression then you've seen 'em all. We were poor in 1929 but we just didn't know it.
Those darn Asians are buying all the gold!
HG
So, assuming I do know what a gold coin is that I find in the street, to eat at McDonalds after the crash, I just chip off a corner of the coin? Or will after a crash of that magnitude occurs, will it take the whole coin? But assuming that the folks at McDonalds weren't smart enough to store up gold coins, will they have any food to sell?
"Those darn Asians are buying all the gold!"
If so, they are buying it at record high prices. Someone ought to teach them about how to invest.
I cannot see why a US slowdown would cause the price of gold to go up. Trade deficit, I can understand... On the other hand, the trade deficit tends to go down when the economy slows down.
Gold looks good right now. I give thanks to Easy Al and his younger brother Easy Ben and their housing bubble. I read somewhere today that since the housing industry is running on fumes (my area McMansions are sitting) that Easy Ben will have to call off the fight against the commodity supercycle and cut rates to pump up America's growth engine the housing industry.
Ahhh the daily, "likely US economic slowdown" thread...seems like this has been going on for years, an years, throw in some more years......YAAAAAAAAAAAWWWWWWWWWNNNNN.
Folks, believe it or not, because of how quickly economic information flows and market corrections can be made in the information age...the only economic slowdown of any magnitude approaching the "Great Depression" will only come from some kind of holocaust.
So, IMHO, previous poster mentioning guns, gas, and real estate...along with numerous cans of tuna would be right.
I've never understood gold bugs. Gold can't be eaten, worn, or burned. It has industrial uses. In the event of an economic collapse, it will be useless.
Those darn Asians are reacting to the overproduction of dollars and preferring to hold gold rather than dollars or currencies that base their rates on dollars. The gold does not depreciate. Dollars are depreciating, at more than 12% annually over the last 6 years. Those darn Asians are not "driving up the price of gold." Lots of those darn Americans are putting their savings in gold and silver, too. Buying gold gives the buyer a small loss overall in absolute terms because he pays a slight premium to buy and gives away a slight discount when he sells. Silver, however, is going up now a bit faster than inflation and the price thereof depends on its heavy industrial use which is about double the rate at which new silver is mined. Gold is a way to retain 90-95% or so of the value of its purchase and is not an investment for increase.
Those increased sales of gold reserves constitute a purchase of currency, mostly dollars and is a reason that prices in the US have not gone up so fast as the value of the dollar has declined. Foreign central banks are incrasing their stock of dollars, perhaps attempting to keep the value of their dollar stocks from declining. It works in that they have the same value of reserves but the reserves are composed of ever more dollars. This keeps price increases in the US down and is fine so long as the European and Asian economies do not go into decline, at which point the central banks will begin to sell their dollars for usable cash which will manifest in a more rapid rise in prices in the US. If that accompanies a downturn here then we will have a return of the Carter Era official (as opposed to real) inflation rates. Rates are fairly high right now but are not reflected in the official numbers because those numbers always omit the prices that rise the fastest- to get what is called "core" inflation, i.e. cpi rises minus energy and housing.
It's more important to own lead if a crash comes. Owning enough lead assures you that you can take all the gold, or whatever else you want.
Owning gold during a crash will only make you a target of those owning lead.
......Those darn Asians are buying all the gold! .....
Read this for some insight...
By: Doug Casey
April 3, 2006
Long-term subscribers are already aware of a resource market phenomenon broadly referred to as the "quiet season," but which we here at Casey Research tend to view as the "Shopping Season."
You also might call it summer.
As you can see in Chart A, which summarizes gold's monthly price moves over the past 30 years, the yellow metal typically shows weakness from February to April, rallies in May, then heads down for summer. In August, gold typically begins to rebound and moves up pretty much for the rest of the year. Of course, this is an average pattern, not an invariable one. In 10 years out of the last 30, gold dropped in the fourth quarter.
Even so, the long-term data suggest the average pattern is worth paying
attention to.
But will the pattern hold up in the current bull market? The historical data is sparse, in that gold has traded freely only since Nixon closed the gold window on August 15, 1971. That triggered gold's only secular bull market so far, from $35 in August 1971 to $850 in January 1980. For the moment, let's discount that market's first big leg, to Dec 1974 (when gold reached $200), as catch-up for decades of currency inflation. The best analogy to our current circumstance is the period from August 1976, when the metal bottomed at $103, to gold's peak in 1980. The chart for that 5-year bull market fits the long-term pattern quite well.
But Why?
Why should gold bullion have a seasonal pattern? There are several reasons, among the more important being the jewelry market, which accounts for about three quarters of the gold sold each year.
What we see for the fourth quarter of each is the impact of the gift-giving tradition associated with the druid Winter Solstice, now known as Christmas. Layered on top of that is the Indian festival season of Diwali, which kicks off in November and continues through the first leg of the traditional wedding season in December.
In Chart A, you'll see noticeable spikes in both January and September, months when Indian manufacturers typically restock inventories to meet the demands of the two Indian wedding seasons. The first, mentioned above, starts in November and ends in December. The second starts in late March and runs through into early May.
Can Indian jewelry buying be a major driver of gold market seasonality? Probably. Don't forget that gold, viewed as an industrial commodity, has been in a primary supply deficit since 1990; more has been used than produced, and the world has been living out of inventory. Now Western central banks are slowing their illadvised selling, and people in China, Russia, the Mideast and India will be buying in size. Further, in 2005, investment in gold ETFs and similar financial products showed a 53% increase, to 203 tonnes. And things are barely starting to warm up.
Given the tight supply and growing demand, this is a market where prices are very much set on the margin, which is where India plays a role. As you are no doubt aware, India traditionally has an affinity for gold, expressed most emphatically in wedding rituals.
The propensity to lavish gold on blushing brides has kept pace with the country's rapidly rising wealth (its GDP growth has been better than 6% annually since the early nineties and is expected to top 8.1% in 2006). Economic success has fostered an entire new Indian middle class and middle-class wannabes with new-found wealth to be stashed and neighbors to be impressed. That adds an important new dimension to the gold market, helped along by a trend for Indian banks to aggressively market loans specifically for the purpose of buying gold during the wedding season.
In fact, in 2005 Indian gold jewelry sales rose by 25 percent, and now that country takes credit for about 23% of the world's consumer gold sales. The U.S., at #2, takes down just 12%.
Jewelry buying is nice and certainly contributes to gold's seasonality. But remember, what's really going to supercharge the market is buying by central banks and the public, as they increasingly realize that the dollars they're sitting on are melting.
The Gold Stocks
The summer dip in gold, needless to say, doesn't help gold stocks. And it's amplified by the habits of Canadian brokers, who deal with their relatively short northern summer by taking relatively long summer vacations. That means fewer stories being breathlessly told to listeners with cash.
Even worse, the brokers--wanting to keep their clients safe while they themselves lounge at lakeside cabins--begin telling clients in March to sell and sit aside during the summer months, which sucks more air out of the market. Of course it's not just the gold stocks; there's a lot of wisdom to the old saw "Sell in May, go away". It's worth noting, however, that here we are in April and we see little sign of gold stock weakness--suggesting that there is either less selling going on or more buying from new-to-sector investors... or, likely, both.
And the people who do the actual exploration generally are busiest in the summer, typically working in remote areas of the Northern Hemisphere largely inaccessible in the winter. The absence of explorers from their offices translates into a dearth of news, made worse by the fact that even if there were new, the companies would want to hold on to it until it would do them some good--i.e. when there are brokers actually sitting at their desks.
To recap, in the summer gold bullion prices soften, resource brokers stop working the phones, and explorers head out to kick rocks and go incommunicado. There's a news slowdown, low trading volumes and a flat to declining market for resource equities from about April 1 to about August 1, give or take a month.
And it is during that quiet period that we happily focus on shopping for our favorite stocks.
Or at least, that's the way it is supposed to work.
The Crystal Ball
I'm not going to tell you that things are going to be different this year. But only because the person who tells you "this time is different" is usually wrong and often walks into a disaster.
However, when pondering gold's seasonality, it's better not to focus on just the long-term pattern shown in Chart A or even the five-year average pattern in Chart B. They show what's normal--not what's inevitable.
Instead, focus more on Chart C below, which paints a straightforward portrait of gold's daily price action from January 1975 through January 1980. While the seasonal pattern generally holds up, the trend is clearly for higher lows and higher highs throughout.
That is, in our view, the track we are currently on. While gold's price reflects the long-term seasonal pattern, the pattern is overlaid on a strong upward trend.
And lest you have any doubt, I am convinced we are now in the gold (and silver) bull market for the record books, a bull market that will surprise even me with its strength. And that's saying something.
In the way of evidence that this year is going to surprise and delight, simply look at gold's price action so far. Instead of the seasonal slump following January, gold has powered ahead and partied on in 2006 and is now trading at over $580, a 12% increase since the first of the year.
Based on traditional patterns alone, Bud Conrad, who assembled Chart D, projects that gold could be headed to $700 this year. He calculates how fast gold was rising over the 1976 to 1979 period and applies that to the price at the start of this year to see how high gold might rise. The dotted line shows the projection from history, and the solid line shows the actual so far this year. Needless to say, we are off to a great start.
I think this could be conservative, and breaking even $750 by year-end wouldn't surprise me. As bad as things were in the late 1970s, the last secular bull market for gold, they are much, much worse now, by pretty much every measure. Whether the level of debt, the size of the entrenched and philosophically unsound bureaucracy, the Current Account Deficit, the Forever War raging on a nearly global basis, the entrenched and worsening problems with entitlement programs, the trillions of perilously perched derivatives... The list, unfortunately, goes on.
Chart D shows how the market could behave if the price replays the trend of the bull market of the late 1970s. You can use it as a baseline, something to watch as a way of gauging just how wild things are getting in gold and--by extension--gold stocks, over the coming year.
How We Play It
I doubt we'll see much of the traditional pullback this summer. But if it occurs, don't hesitate to use it to back up the truck for your favorite stocks. To help you in that regard, in this issue we offer up our quarterly Buy, Sell and Hold updates on all the stocks we are following on your behalf--now enhanced with our indications of "Best Buys." And don't neglect adding to your hoard of physical gold coins.
Looking over the stocks, I have to say that there has never been, in my experience at least, a better slate of junior explorers to choose from.
That's thanks to many factors, including improvements in technology, the general lack of exploration over the last 30 years and the opening up of the ex-communist block to foreign investment. Toss in strong metals prices and talented management teams, and you have all the ingredients for significant discoveries.
While it's too early to tell whether we'll get a mega-discovery--of 10 million ounces or more--the odds hugely favor a number of 1- to 3-million-ounce discoveries being made. As discussed at some length in IS XXVI, No. 12, December 2005, "How High Will Your Gold Shares Go?", the combination of much higher gold and silver prices, big discoveries and the near certainty of a collapsing dollar, will create an ueber-bull... a once-in-alifetime chance to make life-changing profits quickly.
I know you may find it hard to believe, but by the time this thing is over, your $.50 cent stocks will be trading for $5.00, and your $2.00 stocks, for $20. Or more. It's going to be at least as wild as the Internet market was in the late '90s.
Given that view, it's hard to see a summer pullback for gold, should there be one, in anything other than a positive light.
You can keep your powder dry for the next little while and look to pick stocks for less during dips. Or you can just keep buying, riding the tides and ignoring the dips altogether. That's the approach I'll be taking... show me a good company, run by good people, working a good project and selling at the right price, and I'm a buyer... though at this time of year, being patient to let the market come to you probably makes the most sense.
If there was one misstep you could make at this point, it would be to get scared off by the inevitable volatility and step aside until it gets "safe" to come back in. Too often that results in missing major up-moves. Trying to pick the tops or bottoms of any market is a fool's game.
A final thought: This market trend is solidly in motion. While it may periodically scare you as much as it thrills you, at no point doubt that it is your friend. Treat it accordingly and it will treat you well. In fact, even better than you can currently imagine.