>> it doesn't cover most of the supply deficit, which is close to 1,200 tons, using official GFMS data <<
hah! there's nothing "official" about their data.
see: btimes.co.za
their data is based on projections and speculation which may prove to be faulty. for instance, their forecast for gold demand in 2001 will be too high, because they were under the assumption that a weaker u.s. dollar would lend support to foreign demand, helping to offset weakness here due to our slowing economy. well unfortunately for gold bugs, our economy is weakening significantly which is hampering demand for gold here, and the dollar is getting stronger, keeping a lid on demand abroad. and now weakness is spreading to the rest of the world for a triple whammy. strong dollar; weak u.s demand; weak foreign demand. the worst scenario for gold no matter how you slice it.
>> some market researchers opine the deficit could be even higher than that. <<
yeah and they probably have an agenda that encourages that belief.
>> central banks WON'T panic...why should they? they're bureaucrats <<
when have you known bureaucrats to do the right thing? they are stupid and foolish and self-serving. just figure out the right thing for them to do and you can bet they will find a way to do the exact opposite! you gold bugs would agree that it is foolish for central banks to lease and or dump much of their gold onto the market wouldn't you? yet they do it. most gold bugs think miners are foolish for hedging a substantial portion of their reserves--yet they do it. proof positive that you can't count on people in power who supposedly know better when it comes to gold to do the "right" thing!
>> 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. <<
ahh, but you had record demand for gold due to y2k and a hot economy. so sideways movement with record demand will change to downward movement when demand falls off steeply as it is now. once again you ignore adjustments for inflation, which puts gold at new lows, backing the belief that limits on central bank leasing/sales haven't generated positive returns.
>> and why should there be one in this instance? <<
well our economy has been slowing down, our markets have been weak, and gold hasn't made any progress. gold bullion bottomed within one day of the nasdaq. so if we continue in the same direction we've been heading, i would say the correlation will probably hold and gold will go lower.
>> 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. <<
fair enough. no law that says we have to agree. i think there's a significant likelihood of it happening. significant enough to warrant planning for it. it is not the only scenario of course. gold could just sit in an excruciating range for another couple of years just like it has for the past couple of years, eroding investors capital due to inflation.
>> 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. <<
but gold (at least in u.s dollars) has made new lows since then, so it wasn't a true bottom in real dollar terms. same for gold stocks. from late summer of '99 to now the xau and the hui are lower--before adjusting for inflation. so unless you are a good stock picker, you have lost out on a buy and hold investment in gold over the last couple years. i don't consider that a bottom, unless maybe you're an indonesian!
>> i meant of course that its purchasing power INCREASES - has happened in every deflationary period since the 16th century. <<
i don't agree with this argument. i don't think gold does well during deflationary times. people like to point to homestake mining taking off in 1932 as an example of gold doing well during the deflationary 1930's, but i would argue that the deflation was occurring during the latter 1920's and essentially ended in 1932, when you had a bottom in the stock market, gold and commodities in general.
>> however, their massive forward selling has contributed to the decline in the gold price, that is an irrefutable fact. <<
no more than hedgers and short sellers exerting selling pressure on other commodities, and no different than short sellers exerting downward pressure on certain nasdaq stocks. if the fundamentals for gold were better abx's hedging wouldn't make a bit of difference. the market always eventually goes where it wants to go.
>> 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 <<
ok that's all i wanted. you to concede that this might not be a secular bull market in gold, but just a cyclical bull within a secular bear. there is a big difference when deciding how to play it going forward.
>> 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 <<
so a market has to rally over 78% for more than 2 months to be considered a bull market for you? the nikkei rallied for almost a year and a half from Q4 1998 to Q1 2000, gaining 63% from it's bottom. most people wouldn't say the nikkei is in a bull market! i guess you are going to say that was only a cyclical bull within a bear cause it was a fib retracement. anyway i won't argue that this might be what you define as a cyclical bull, but i was under the distinct impression you were saying that this latest move was a secular bull ending the long running bear market.
>> the HUI is thus more indicative of future trends in the metal <<
well i'm not sure you can make that case. recently the hui has acted stronger than the xau yet gold bullion has been weak. sounds like the xau has been closer to the performance of bullion than the hui.
>> 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. <<
i guess you would have to detail them for me, because all i see is tanking from gold/silver bullion and the xau/hui, suggesting that the move off that run to $300 is in serious jeopardy.
>> i do believe the gold market is an incestuous market and frequently manipulated <<
i don't. i believe supply and demand for gold determines the price, and there just hasn't been enough demand to meet the supply in recent years. that may very well change in the coming months or years.
>> it turned out that PDG wasn't serious. the hedging activities ARE a MAJOR contributor to the weakness in the gold price. <<
naw. lack of demand as an alternative investment and a disinflationary/deflationary environment is the reason gold has trended down.
>> 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. <<
i've heard of it in currency markets. the yen is often cited. if there was enough physical demand for gold leasing wouldn't be able to hold it down, correct?
>> 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 <<
i was under the impression that people who leased gold from central bankers didn't actually take physical delivery of the gold. please explain how that artificially adds physical supply onto the market. |
