<<they limited themselves to about 400 tons per year which covers most of the supply deficit. that doesn't take into account thousands of tons of gold not covered in the agreement. central banks might panic when they want to raise cash and they see gold declining in value while it sits there costing them money to store it, doing absolutely no good. furthermore, gold has actually declined since the washington agreement was announced so that tells you it hasn't had any long-term positive benefit.>>
it doesn't cover most of the supply deficit, which is close to 1,200 tons, using official GFMS data. some market researchers opine the deficit could be even higher than that.
central banks WON'T panic...why should they? they're bureaucrats. imo what the WAG has done is remove some uncertainty from the market - it's true, gold hasn't done much since, but it's not going down much either. we're in a sideways trading range since '98.
<<in this particular instance, yes. i never said in every instance there was a correlation.>>
and why should there be one in this instance?
<<i don't have a problem with that. i believe after 20 years it is time to start taking a look at gold. doesn't mean it can't see $200.>>
nothing is impossible. but i'm concentrating on probabilities, not possibilities. and the probability of reaching $200 seems very low to me, for the reasons mentioned earlier.
<<yes it has been pretty negative, but remember in bear markets cheap can become ridiculously cheap and declines can occur for much longer and farther than people expect. just like in bull markets things rise much further than people could ever imagine.>>
i agree with that in principle, but think it has already happened. at the '99 low, the bullish consensus on gold fell to an all time low of 11% - that was when everybody threw the towel.
<<so you are essentially saying that gold will fall in step with other prices? how is that any consolation? if you hold cash in a deflationary environment your purchasing power increases!>>
sorry, that was merely a mistake. i meant of course that its purchasing power INCREASES - has happened in every deflationary period since the 16th century.
<<you started this off by ignoring the main point of my argument, which was not to advocate purchasing abx as the best play on gold going forward, but to counter the ludicrous conspiracy theorists who blame abx for their troubles. that's the only point i was trying to make, and then we got sidetracked.>>
we never had an argument there - i don't consider ABX to be part of a conspiracy. however, their massive forward selling has contributed to the decline in the gold price, that is an irrefutable fact.
<<that has happened on a couple of occasions to the xau in the past 15 years. yet it eventually went on to new lows. i could also give you examples of other markets that have doubled off their lows but were still in bear markets.>>
the XAU traditionally moves in a trading range - its bull markets have of course been merely cyclical bulls in the context of a secular bear which has been in force since the 1980 high. nevertheless, those cyclical bulls were well worth playing:
sharelynx.net
note the '85 - '87 and the '93 bull markets: they began with similar looking structures as the current one:
sharelynx.net
sharelynx.net
name those other examples please.
<<so how would you define a bull market, any rally lasting more than 2 months that rallies what percentage? 100%? 80%? 50%? second of all you are conveniently using a very narrow index (hui) of just a handful of stocks to make your case. gold bullion and the xau haven't performed nearly as well.>>
i use for definition of a bear market rally that it shouldn't last much longer than 2 months, usually it retraces only a fibo percentage of the preceding decline (38%,50%,62%,78%, roughly) and has a corrective looking wave structure. the HUI is no less narrow than the XAU - in fact, it contains more issues. the difference is mainly that the XAU contains one copper producer (PD , over 13% weight) and the three heaviest hedgers (ABX, AU, PDG), all of which are not in the HUI. the HUI is thus more indicative of future trends in the metal. the most important thing about the rally off the November low is btw. not its duration and extent, it's the impulsive wave structure. also, since '99, there have been numerous non-confirmations between gold, silver, and their stocks (higher and lower lows occurring simultaneously). those are always found shortly before bull runs begin. the weight of evidence indicates it's a bull market now.
<<well you made some negatively slanted comments about abx and i have read many columns and websites that many si gold bugs frequent who suggest abx is the worst mining stock and they are part of some conspiracy. so i used your comments as a springboard to air my views on the subject.>>
fair enough, but you made it sound as if i had alleged something along those lines, which i haven't. i do believe the gold market is an incestuous market and frequently manipulated. but that happens every so often in other markets too (see for instance the recent conviction of Merrill Lynch and a host of other prominent firms in a copper market manipulation case). where there is opportunity and motive, these things happen.
<<yeah, well so what. short sellers always exacerbate some downward pressure in any market. they are not the reason for it going down though, at least not for any length of time. eventually the market goes where it wants to anyway. are all short sellers and hedgers part of a big conspiracy? >>
are you talking to me?
<<but gold still eventually went back down and made new lows. like i said the market eventually goes wherever it wants to and these hedging activities are not the reason to be attributing the moves in gold.>>
it turned out that PDG wasn't serious. the hedging activities ARE a MAJOR contributor to the weakness in the gold price.
there's a major difference between gold forward selling as practiced nowadays and the hedging activities in other commodity markets. have you ever heard of a copper, wheat, oil or pork bellies lending market? i didn't think so. when hedging exposure in these markets, it is done by contractually obliging a counter-party to take on the risk. it's a pure 'paper trade', a zero sum game. not so in gold hedging, as for instance practiced by ABX. that involves taking out gold loans from central banks, meaning that ADDITIONAL PHYSICAL SUPPLY hits the market in the here and now, unlike in every other commodity market where risks are hedged (exceptions are the other precious metals, where lending markets also exist, primarily in silver. PGM lending is minuscule).
<<once again my point wasn't to suggest that you should run out and buy abx. my point was that people (not necessarily you per se) that buy into this abx and gold cartel conspiracy bullshit are barking up the wrong tree.>>
well, that wasn't my argument for avoiding ABX. |
