Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Trying to Buy Coinbase Stock on IPO Day - Institutional Investors Freeze out Retail Investors - 15th Apr 21
Stocks or Gold – Which Is in the Catbird Seat? - 15th Apr 21
Time For A Stock Market Melt-Up - 15th Apr 21
Stocks Bull Market Progression Now Shows Base Metal Strength - 15th Apr 21
AI Tech Stocks Buy Ratings, Levels and Valuations - 14th Apr 21
Easy 10% to 15% Overclock for 5600x, 5900x, 5950x Using AMD Ryzen Master Precision Boost Overdrive - 14th Apr 21
The Current Cannabis Sector Rally Is Pointing To Another Breakout - 14th Apr 21
U.S. Dollar Junk Bond Market The Easiest Money in History - 14th Apr 21
The SPY Is Nearing Resistance @ $410… What Is Next? - 14th Apr 21
The Curious Stock Market Staircase Rally - 14th Apr 21
Stocks are Heating Up - 14th Apr 21
Two Methods in Calculating For R&D Tax Credits - 14th Apr 21
Stock Market Minor Correction Due - 13th Apr 21
How to Feed Budgies Cucumbers - Best Vegetables Feeding for the First Time, Parakeet Care UK - 13th Apr 21
Biggest Inflation Threat in 40 Years Looms over Markets - 13th Apr 21
How to Get Rich with the Pareto Distribution - Tesco Example - 13th Apr 21
Litecoin and Bitcoin-Which Is Better? - 13th Apr 21
The Major Advantages Of Getting Your PhD Online - 12th Apr 21
Covid-19 Pandemic Current State for UK, US, Europe, Brazil Vaccinations vs Lockdown's Third Wave - 12th Apr 21
Why These Stock Market Indicators Should Grab Your Full Attention - 12th Apr 21
Rising Debt Means a Weaker US Dollar - 12th Apr 21
Another Gold Stocks Upleg - 12th Apr 21
AMD The ZEN Tech Stock - 12th Apr 21
Overclockers UK Build Quality - Why Glue Fan to CPU Heat sink Instead of Using Supplied Clips? - 12th Apr 21 -
What are the Key Capabilities You Should Look for in Fleet Management Software? - 12th Apr 21
What Is Bitcoin Gold? - 12th Apr 21
UK Covd-19 FREE Lateral Flow Self Testing Kits How Use for the First Time at Home - 10th Apr 21
NVIDIA Stock ARMED and Dangeorus! - 10th Apr 21
The History of Bitcoin Hard Forks - 10th Apr 21
Gold Mining Stocks: A House Built on Shaky Ground - 9th Apr 21
Stock Market On the Verge of a Pullback - 9th Apr 21
What Is Bitcoin Unlimited? - 9th Apr 21
Most Money Managers Gamble With Your Money - 9th Apr 21
Top 5 Evolving Trends For Mobile Casinos - 9th Apr 21
Top 5 AI Tech Stocks Investing 2021 Analysis - 8th Apr 21
Dow Stock Market Trend Forecast 2021 - Crash or Continuing Bull Run? - 8th Apr 21
Don’t Be Fooled by the Stock Market Rally - 8th Apr 21
Gold and Latin: Twin Pillars of Western Rejuvenation - 8th Apr 21
Stronger US Dollar Reacts To Global Market Concerns – Which ETFs Will Benefit? Part II - 8th Apr 21
You're invited: Spot the Next BIG Move in Oil, Gas, Energy ETFs - 8th Apr 21
Ladies and Gentlemen, Mr US Dollar is Back - 8th Apr 21
Stock Market New S&P 500 Highs or Metals Rising? - 8th Apr 21
Microsoft AI Azure Cloud Computing Driving Tech Giant Profits - 7th Apr 21
Amazon Tech Stock PRIMEDAY SALE- 7th Apr 21
The US has Metals Problem - Lithium, Graphite, Copper, Nickel Supplies - 7th Apr 21
Yes, the Fed Will Cover Biden’s $4 Trillion Deficit - 7th Apr 21
S&P 500 Fireworks and Gold Going Stronger - 7th Apr 21
Stock Market Perceived Vs. Actual Risks: The Key To Success - 7th Apr 21
Investing in Google Deep Mind AI 2021 (Alphabet) - 6th Apr 21
Which ETFs Will Benefit As A Stronger US Dollar Reacts To Global Market Concerns - 6th Apr 21
Staying Out of the Red: Financial Tips for Kent Homeowners - 6th Apr 21
Stock Market Pushing Higher - 6th Apr 21
Inflation Fears Rise on Biden’s $3.9 TRILLION in Deficit Spending - 6th Apr 21
Editing and Rendering Videos Whilst Background Crypto Mining Bitcoins with NiceHash, Davinci Resolve - 5th Apr 21
Why the Financial Gurus Are WRONG About Gold - 5th Apr 21
Will Biden’s Infrastructure Plan Rebuild Gold? - 5th Apr 21
Stocks All Time Highs and Gold Double Bottom - 5th Apr 21
All Tech Stocks Revolve Around This Disruptor - 5th Apr 21
Silver $100 Price Ahead - 4th Apr 21
Is Astra Zeneca Vaccine Safe? Risk of Blood Clots and What Side Effects During 8 Days After Jab - 4th Apr 21
Are Premium Bonds A Good Investment in 2021 vs Savings, AI Stocks and Housing Alternatives - 4th Apr 21
Penny Stocks Hit $2 Trillion - The Real Story Behind This "Road to Riches" Scheme - 4th Apr 21
Should Stock Markets Fear Inflation or Deflation? - 4th Apr 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Gold, the Internet and Creating Imaginary Money

Commodities / Gold and Silver 2011 Jun 28, 2011 - 12:05 PM GMT

By: Ned_W_Schmidt

Commodities

Best Financial Markets Analysis ArticleOne has to love today's technology. Where else can we get so much mail from people whom we do not want to get mail? Never has porn been delivered in such high quality. But, the good news does not stop there. While creating social networks for people with lives in which no one is interested and providing the capability for old people to twitter among themselves, the internet is now providing an important government function, imaginary money.


Bitcoins

Source: bitcoinchartscom

Chart above is of the value of an imaginary money that trades on the internet, bitcoins. (See Coins of the Geeks, Businessweek, 20 June) Bitcoins may be the perfect modern money, and will no doubt be recommended by intellectually inbred Keynesians academics as a replacement for Greece's use of the Euro. This money has no intrinsic value, exists only in the electronic imagination of a server, and can be created in unlimited quantity. Is this not every government's dream come true?

In the above chart note the distinctive parabolic formation that occurred in the value of this imaginary money, and the ensuing collapse out of that formation. As the price of bitcoins has no reality, it traded on fantasy and emotions. Such is what technical analysis attempts to gauge, in part. That chart pattern was totally imaginary. And no, we have heard no claims yet of a banking cabal manipulating the price of bitcoins, but am sure it will develop.

Similarity of that chart pattern to that of Silver should be considered. Both traded into that pattern based on fantasies of future price. Real value was essentially ignored. With Silver having broken the critical US$34 level, attention should be on the intraday cash low of ~$32.25. A move through that prices raises the potential for the completion of the parabolic chart pattern failure.

At the same time the value of an imaginary money was rising, world's demand for real money was faltering. In the chart below is plotted the Gold holdings of GLD, the Gold ETF. That chart seems to show a slightly negative bias for Gold demand. Since June of last year, the Gold holdings of GLD have declined by approximately 110 tonnes.

Peak holdings: June 2010, 1320 tonnes, Down 110 tonnes.

Peak Holdings $Gold vs Gld Tonnes

What should Gold investors being doing in this period of faltering demand for Gold and weakening prices? To answer that question, let us think of something else. Suppose one owned the stock of a company that was to release a patented cure for the common cold in "5 years." Price of that stock is faltering because investors would at this time rather invest in really important concepts, social networking sites. Would you sell the stock?

Same is true for Gold. Investors should retain their Gold as "5 years" from now somewhere in the world politicians and Keynesians will again be making muck of something. Rather, investors should consider building on their Gold foundation. Adding Rhodium and Chinese Renminbi to those holdings would make good sense at this time.

From where might the money come with which to purchase these additional investments? Chart below may help answer that question.

Gold Stock Junior Index

In that chart is plotted MVGDXJ, index used for ETF of junior mining stocks. Recent action in that index has taken out the previous short-term low. It is developing a negative trend. That development, combined with the faltering of markets for precious metals, may suggest that substantially lowering prices for an extended period of time for junior mining stocks is likely. All of which is a nice way of saying that with no support evident in that chart, the junior mining stock appear on the verge of collapsing into a significant bear market.

In that chart is also plotted a stochastic oscillator. That measure is useful during bull markets in selecting entry points as it attempts to gauge when price is at the lower edge of a presumably positive channel. In bear markets, however, the interpretation of the stochastic becomes more difficult. As it attempts to proxy the trading channel, an over sold reading on a stochastic at the time price is moving to new lows may be an indication of a breaking down of the previous channel. It might be signally that a new channel, with a negative trend, is developing. If that is the case, then we may need to modify our interpretation of the stochastic oscillator. Over sold, a normal buy signal, would become a Do Not Sell signal. An over bought condition, stochastic more than 80%, would then be interpreted as a Good Time to Sell signal.

US$GOLD & US$SILVER VALUATION Source: www.valueviewgoldreport.com
  US$ GOLD US$ GOLD % US$ / CHINESE YUAN CHINESE YUAN % US$ SILVER US$ SILVER %
CURRENT $1,500   $0.1544   $34.00  
SELL TARGET $1,970 31% $0.5000 224% $35.50 4%
LONG-TERM TARGET $1,827 22% $0.3330 116% $33.00 -3%
FAIR VALUE $860 -43%     $15.60 -54%
ACTION Gold preferred to Silver.   Buy Chinese Yuan   Sell Silver  

¹These estimates are subject to change.

By Ned W Schmidt CFA, CEBS

Copyright © 2011 Ned W. Schmidt - All Rights Reserved

GOLD THOUGHTS come from Ned W. Schmidt,CFA,CEBS, publisher of The Value View Gold Report , monthly, and Trading Thoughts , weekly. To receive copies of recent reports, go to www.valueviewgoldreport.com

Ned W Schmidt Archive

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


Comments

chetrasho
28 Jun 11, 20:41
bitcoins misinformation

Is this article a joke? I'm not sure where to begin correcting all the misinformation...

First of all, there will only ever be 21mil bitcoins. So, bitcoin is actually a Keynesian's nightmare.

It's actually the USD and GBP that "have no intrinsic value, exist only in the electronic imagination of a server, and can be created in unlimited quantity."

Bitcoins are not every government's dream. Bitcoins are competition for government money monopolies.

Why not do some research ?


Post Comment

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

6 Critical Money Making Rules