Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
WARNING PAYPAL Making a Grab for US $1200 Stimulus Payments - 4th Apr 20
US COVID-19 Death Toll Higher Than China’s Now. Will Gold Rally? - 4th Apr 20
Concerned That Asia Could Blow A Hole In Future Economic Recovery - 4th Apr 20
Bracing for Europe’s Coronavirus Contractionand Debt Crisis - 4th Apr 20
Stocks: When Grass Looks Greener on the Other Side of the ... Pond - 3rd Apr 20
How the C-Factor Could Decimate 2020 Global Gold and Silver Production - 3rd Apr 20
US Between Scylla and Charybdis Covid-19 - 3rd Apr 20
Covid19 What's Your Risk of Death Analysis by Age, Gender, Comorbidities and BMI - 3rd Apr 20
US Coronavirus Infections & Deaths Trend Trajectory - How Bad Will it Get? - 2nd Apr 20
Silver Looks Bearish Short to Medium Term - 2nd Apr 20
Mickey Fulp: 'Never Let a Good Crisis Go to Waste' - 2nd Apr 20
Stock Market Selloff Structure Explained – Fibonacci On Deck - 2nd Apr 20
COVID-19 FINANCIAL LOCKDOWN: Can PAYPAL Be Trusted to Handle US $1200 Stimulus Payments? - 2nd Apr 20
Day in the Life of Coronavirus LOCKDOWN - Sheffield, UK - 2nd Apr 20
UK Coronavirus Infections and Deaths Trend Trajectory - Deviation Against Forecast - 1st Apr 20
Huge Unemployment Is Coming. Will It Push Gold Prices Up? - 1st Apr 20
Gold Powerful 2008 Lessons That Apply Today - 1st Apr 20
US Coronavirus Infections and Deaths Projections Trend Forecast - Video - 1st Apr 20
From Global Virus Acceleration to Global Debt Explosion - 1st Apr 20
UK Supermarkets Coronavirus Panic Buying Before Lock Down - Tesco Empty Shelves - 1st Apr 20
Gold From a Failed Breakout to a Failed Breakdown - 1st Apr 20
P FOR PANDEMIC - 1st Apr 20
The Past Stock Market Week Was More Important Than You May Understand - 31st Mar 20
Coronavirus - No, You Do Not Hear the Fat Lady Warming Up - 31st Mar 20
Life, Religions, Business, Globalization & Information Technology In The Post-Corona Pandemics Age - 31st Mar 20
Three Charts Every Stock Market Trader and Investor Must See - 31st Mar 20
Coronavirus Stocks Bear Market Trend Forecast - Video - 31st Mar 20
Coronavirus Dow Stocks Bear Market Into End April 2020 Trend Forecast - 31st Mar 20
Is it better to have a loan or credit card debt when applying for a mortgage? - 31st Mar 20
US and UK Coronavirus Trend Trajectories vs Bear Market and AI Stocks Sector - 30th Mar 20
Are Gold and Silver Mirroring 1999 to 2011 Again? - 30th Mar 20
Stock Market Next Cycle Low 7th April - 30th Mar 20
United States Coronavirus Infections and Deaths Trend Forecasts Into End April 2020 - 29th Mar 20
Some Positives in a Virus Wracked World - 29th Mar 20
Expert Tips to Save on Your Business’s Office Supply Purchases - 29th Mar 20
An Investment in Life - 29th Mar 20
Sheffield Coronavirus Pandemic Infections and Deaths Forecast - 29th Mar 20
UK Coronavirus Infections and Deaths Projections Trend Forecast - Video - 28th Mar 20
The Great Coronavirus Depression - Things Are Going to Change. Here’s What We Should Do - 28th Mar 20
One of the Biggest Stock Market Short Covering Rallies in History May Be Imminent - 28th Mar 20
The Fed, the Coronavirus and Investing - 28th Mar 20
Women’s Fashion Trends in the UK this 2020 - 28th Mar 20
The Last Minsky Financial Snowflake Has Fallen – What Now? - 28th Mar 20
UK Coronavirus Infections and Deaths Projections Trend Forecast Into End April 2020 - 28th Mar 20
DJIA Coronavirus Stock Market Technical Trend Analysis - 27th Mar 20
US and UK Case Fatality Rate Forecast for End April 2020 - 27th Mar 20
US Stock Market Upswing Meets Employment Data - 27th Mar 20
Will the Fed Going Nuclear Help the Economy and Gold? - 27th Mar 20
What you need to know about the impact of inflation - 27th Mar 20
CoronaVirus Herd Immunity, Flattening the Curve and Case Fatality Rate Analysis - 27th Mar 20
NHS Hospitals Before Coronavirus Tsunami Hits (Sheffield), STAY INDOORS FINAL WARNING! - 27th Mar 20
CoronaVirus Curve, Stock Market Crash, and Mortgage Massacre - 27th Mar 20
Finding an Expert Car Accident Lawyer - 27th Mar 20
We Are Facing a Depression, Not a Recession - 26th Mar 20
US Housing Real Estate Market Concern - 26th Mar 20
Covid-19 Pandemic Affecting Bitcoin - 26th Mar 20
Italy Coronavirus Case Fataility Rate and Infections Trend Analysis - 26th Mar 20
Why Is Online Gambling Becoming More Popular? - 26th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock Markets CRASH! - 26th Mar 20
CoronaVirus Herd Immunity and Flattening the Curve - 25th Mar 20
Coronavirus Lesson #1 for Investors: Beware Predictions of Stock Market Bottoms - 25th Mar 20
CoronaVirus Stock Market Trend Implications - 25th Mar 20
Pandemonium in Precious Metals Market as Fear Gives Way to Command Economy - 25th Mar 20
Pandemics and Gold - 25th Mar 20
UK Coronavirus Hotspots - Cities with Highest Risks of Getting Infected - 25th Mar 20
WARNING US Coronavirus Infections and Deaths Going Ballistic! - 24th Mar 20
Coronavirus Crisis - Weeks Where Decades Happen - 24th Mar 20
Industry Trends: Online Casinos & Online Slots Game Market Analysis - 24th Mar 20
Five Amazingly High-Tech Products Just on the Market that You Should Check Out - 24th Mar 20
UK Coronavirus WARNING - Infections Trend Trajectory Worse than Italy - 24th Mar 20
Rick Rule: 'A Different Phrase for Stocks Bear Market Is Sale' - 24th Mar 20
Stock Market Minor Cycle Bounce - 24th Mar 20
Gold’s century - While stocks dominated headlines, gold quietly performed - 24th Mar 20
Big Tech Is Now On The Offensive Against The Coronavirus - 24th Mar 20
Socialism at Its Finest after Fed’s Bazooka Fails - 24th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock and Financial Markets CRASH! - 23rd Mar 20
Will Trump’s Free Cash Help the Economy and Gold Market? - 23rd Mar 20
Coronavirus Clarifies Priorities - 23rd Mar 20
Could the Coronavirus Cause the Next ‘Arab Spring’? - 23rd Mar 20
Concerned About The US Real Estate Market? Us Too! - 23rd Mar 20
Gold Stocks Peak Bleak? - 22nd Mar 20
UK Supermarkets Coronavirus Panic Buying, Empty Tesco Shelves, Stock Piling, Hoarding Preppers - 22nd Mar 20
US Coronavirus Infections and Deaths Going Ballistic as Government Start to Ramp Up Testing - 21st Mar 20
Your Investment Portfolio for the Next Decade—Fix It with the “Anti-Stock” - 21st Mar 20
CORONA HOAX: This Is Almost Completely Contrived and Here’s Proof - 21st Mar 20
Gold-Silver Ratio Tops 100; Silver Headed For Sub-$10 - 21st Mar 20
Coronavirus - Don’t Ask, Don’t Test - 21st Mar 20
Napag and Napag Trading Best Petroleum & Crude Oil Company - 21st Mar 20
UK Coronavirus Infections Trend Trajectory Worse than Italy - Government PANICs! Sterling Crashes! - 20th Mar 20
UK Critical Care Nurse Cries at Empty SuperMarket Shelves, Coronavirus Panic Buying Stockpiling - 20th Mar 20
Coronavirus Is Not an Emergency. It’s a War - 20th Mar 20
Why You Should Invest in the $5 Gold Coin - 20th Mar 20
Four Key Stock Market Questions To This Coronavirus Crisis Everyone is Asking - 20th Mar 20
Gold to Silver Ratio’s Breakout – Like a Hot Knife Through Butter - 20th Mar 20
The Coronavirus Contraction - Only Cooperation Can Defeat Impending Global Crisis - 20th Mar 20
Is This What Peak Market Fear Looks Like? - 20th Mar 20
Alessandro De Dorides - Business Consultant - 20th Mar 20
Why a Second Depression is Possible but Not Likely - 20th Mar 20

Market Oracle FREE Newsletter

Coronavirus-bear-market-2020-analysis

A Stern Reality Check for Gold Naysayers

Commodities / Gold and Silver 2010 Feb 08, 2010 - 08:51 AM GMT

By: Jordan_Roy_Byrne

Commodities

Best Financial Markets Analysis ArticleNeedless to say, Thursday was nothing short of an orgasmic day for Gold bears and Dollar bulls. The precious metals complex crumbled along with the Euro, while the greenback was higher. In fact, it was such a bad day that Gold officially lost its safe-haven status, according to CNBC. This was also noted by Elliot Wave and The Business Insider. All proclaimed that Gold was no safe haven.


In today’s world, how can you blame them? With the resurgence of day trading and most professionals staring at a computer screen all day, most people are worried about what is going to happen in the next hour, much less the next week or month. Everyone is now a trader, but not an investor. Who can remember the trends of the past quarter or year? Apparently, not CNBC, Elliot Wave and the Business Insider.

Not only has Gold been an excellent hedge for the entire decade (and it was in the 1970s), it rose in value during both of the bear markets in stocks. To those with a time horizon beyond a few nanoseconds, this chart is no surprise.

Meanwhile we hear from the bears that Gold is a “crowded trade” and that because there are a few commercials on television, the public is involved. Such anecdotal evidence is easily refuted by facts.

First of all, only 0.7% of all global assets are in Gold and gold-related equities and exchange traded funds. What does a real Gold bubble look like? That figure was 15% in 1934 and 29% in 1980. While more and more people are buying Gold (that is what happens in a secular bull market, participation rises over time!), it is still extremely under-owned while corporate and government bonds are overowned. The vast majority of the few that own precious metals in their portfolio have a weighting below 10%. While a lot of money poured into Gold in 2008 and 2009, even more money poured into Bond funds. That is the crowded trade.   

Secondly, take a look at this chart (with my annotations) from http://www.sentimentrader.com. Essentially, we see that the public’s view on Gold did not exceed 75% bulls as it did in 2006 and 2008. As Gold broke $1000, the public’s bullish appetite barely increased.

Many gold bears are deflationists. They argue that since all asset classes have trended together and trended against the US$, all fall in a deflationary period. This is the correct view when we look at very short periods of time like July to October 2008. However, in the larger picture Gold performs very well on a relative basis in a deflationary period. It outperforms as other asset classes tumble and more importantly, it is the first asset to recover. Many seem to forget that the entire precious metals sector performed very well from November 2008 to February 2009, while stocks continued to fall and commodities were trying to find a bottom.

Furthermore, the US dollar doesn’t have to decline for Gold to do well. Did you know that since the very end of 2004, the US$ is flat but Gold is up 143%? Since July 20, 2007, Gold is up 56% while the dollar is flat. Since early September 2008, Gold is up 35%, while the dollar is up 1%. The majority of deflationists have been dead wrong on Gold and will continue to be wrong. Give huge credit to those who have been right on deflation and Gold: Bob Hoye and Mike Shedlock.

Turning to the technical situation, we see that traders, who are being confused for real technicians, are bearish on Gold for the near term. Joe Terranova on CNBC’s Fast Money said that the long-term uptrend was broken and that people needed to reduce positions. To be fair, long-term for Fast Money may be just a few days. As we will show, the reality is that Gold has a super-bullish technical outlook. It is in the early stages of a parabolic rise.

In the 1970s, Gold began to go parabolic in the middle of 1979, almost 10 years into the bull market. The important breakout occurred in 1978, and then corrected 20% back just below the breakout point (see the circle). This time around, the important breakout occurred at the end of 2007 and then in 2008 we had the snapback to support, though the snapback was a large 34%. Note that in the last bull market the process of breakout, snapback and parabolic move took a year to develop, while this time it is taking about two years. That means this parabolic move will last longer.  

There are some distinct similarities with other bull markets. Look at Oil. Its major breakout occurred in 2004 and its parabolic move began about two and a half years later. The difference is Oil’s snapback to support didn’t occur right away. Its parabolic move began in the ninth year of that bull market.  

The DJIA in the 1980s is a classic example. The major breakout occurred in 1983 and the parabolic move began two years later. If the bull market began in 1975, then the parabolic move began 11 years into the bull market.

Take a look again at the Gold chart and you will notice that the parabolic move has already begun. The recognition phase likely will take some time to develop. While Gold could move to $1300 in the spring, we don’t expect sustained new highs until later this year.

The fundamentals support our view as the financial crisis is entering the most bullish phase for Gold. The sovereign debt crisis, which really began in Iceland, will plague Europe this year and eventually spread to the UK and US by early 2011. Nations have no other choice but to monetize their growing obligations while trying to stimulate their economies with deficit spending and near 0% interest rates. It is a perfect storm for Gold as everything is lining up now for such a storm to begin in late 2010 and early 2011.     

In closing, the huge winners will be Silver and the emerging Gold & Silver junior producers and explorers. For those looking to take advantage of a historic wealth building opportunity, visit http://www.thedailygold.com/newsletter and consider how we could help you ride this extremely volatile uptrend.   


http://finance.yahoo.com/news/Gold-Loses-SafeHaven-Status-cnbc-1840648925.html?x=0&sec=topStories&pos=6&asset=&ccode

http://www.elliottwave.com/freeupdates/archives/2010/02/04/Gold-Prices-In-Free-Fall-Safe-Haven-My-Asparagus-.aspx

http://www.businessinsider.com/its-a-good-thing-youre-hedged-with-gold-2010-2

http://thedailygold.com/chartstechnicals/gold-is-0-7-of-global-managed-assets/?p=887/

Good luck and good investing in 2010!

Jordan Roy-Byrne, CMT
http://www.trendsman.com
http://www.thedailygold.com
trendsmanresearch@gmail.com

Trendsman” is an affiliate member of the Market Technicians Association (MTA) and is enrolled in their CMT Program, which certifies professionals in the field of technical analysis. He will be taking the final exam in Spring 07. Trendsman focuses on technical analysis but analyzes fundamentals and investor psychology in tandem with the charts. He credits his success to an immense love of the markets and an insatiable thirst for knowledge and profits.

Jordan Roy-Byrne Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

CrisisMaven
07 Mar 10, 08:42
Gold bubble?

Indeed ... A bubble in, say, shares, stocks or commodities happens when people believe it will "go up and up" (and is, as a rule, as with housing recently and "tech" stocks at the beginning of the millenium, again mainly driven by money inflation). Gold in contrast is a hedge against inflation and against looming sovereign defaults. Inflation by definition is the increase in money supply. There's no doubt that this has happened several fold in only two years. So there is inflation.

Hence there is no gold bubble, as gold has not appreciated by a tenth even of what the monetary base has expanded!


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules