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Strategies & Market Trends : Strictly: Drilling II
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To: Paul Shread who wrote (740)8/29/2001 7:46:29 AM
From: Arik T.G.  Read Replies (2) of 36161
 
Paul,

If my assumptions are correct (ST I don't need underlying assumptions, just watch the chart develop) then first target is to make a local higher high. That's topping 298.5 spot achieved in May.

It's all about the USD. Gold is just another anti Dollar trading vehicle. It's uniqueness is that it's on the Long side of the equation, meaning "unlimited" gain potential and the famous parabolic long side gain compared to the logarithmic "limited" short side gain.
Also, a commodity in essence produced and sold in the real world, its downside potential is limited by production costs which define a very real bottom uncomparable with other trading vehicles like currencies and stocks.

But it's all about the Dollar.
The USD peaked and dropped. It already lost 10% against the Euro in what seems like a change in the LT trend.

FA

When big money starts sloshing around looking for a safe haven Gold will shoot sky high to accomodate the funds involved. Unlike usual currencies that have no stock and are created out of thin air, Gold has very real stock. Total gold production in history (assuming none of it was lost) is worth only 1 Trillion Dollars at current prices. CBs reserves are less then one quarter of it, worth only 250 Billion Dollars. To have a grasp on the "amount" of money - M2 amounts 5.27 Trillion and grew 425 Billion in the past 12 months. Total cap of the US stock markets is $18 Trillion

If gold is to become the lightning rod for money seeking refuge it would have to at least double in price to make room for the sums involved.

20 years of secular bear market created a mountain of short position - some against CBs reserves, and some against Gold not yet produced. Producers learned in the past two decades that it was prudent and profitable to hedge against their future production. I guess that a great deal of the next 5 years of global production is already sold in some form - by selling a Call option or a future contract. This will cause a funny positive feedback - the higher the POG in the future, the less net increase in supply from production, because as prices go higher more call options go into the money and force delivery of promised production.

TA

This scenario is dependable on the investment community starting to diversify from the Dollar and looking at Gold as a viable anti Dollar vehicle. The first part IMO has already begun and the second part is mass psychology reflected in the charts.
If we see low 260s in spot again then I was wrong and will have to rethink it all..
A nice jump from here will support and confirm my thesis.

ATG

Edit: Disclaimer - bot another Dec Gold yesterday @ 273.5 and went long Euro short USD today
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