re: [" The variables to consider are increased terrorism, Iraq, Iran, North Korea and Afghanistan. Also the instability and criminal activities of this administration will add to the positives for gold."]
Gold bugs are beating dead horses Santi.
These horses have all been rode hard and hung up wet.
-- This is not 1979. We do NOT have wage inflation.
In fact, thanks to China -- we have wage deflation.
-- Another fallacy is setting price, or fair value
targets for gold based on re-pricing it for inflation
since 1980. Gold is the barometer of inflation – you
don’t re-price the barometer. If you don’t believe this is
true – ask yourself WHY, for over 20 years of continual,
non-stop inflation in the US; that gold collapsed for
two decades? Why didn’t the market “re-price” gold
for inflation in that timeframe?
-- Bugs only speak, hear, or see the parts of
history they want to speak, hear, or see. The last
great speculative run for gold ended in 1981 AFTER
Central Banks finally acted. This one also ended
AFTER Central Banks finally acted (17 straight Fed
Rate hikes) and the removal of the punch bowl.
-- The time to own (overweight and leverage) gold,
is when inflation is being ignored...or, when Central
Banks are reflating the economy, or stimulating it
with interest rate cuts. Not AFTER they’ve taken
action to stop it.
-- Why did gold bugs ignore the collapse of the
housing bubble and the homebuilder stocks? Could
you have had any better sign of what was yet to
come for gold?
-- Gold bugs only see one side of every trade. The
entire world was all loaded up on the short-side of
the U.S. Dollar trade. Why didn’t anyone else pound
the table on this? And even if you believe in the imminent
death of the dollar… WHY would you pay a $250 premium
in the price of gold ($700) to offset the same basic US Dollar
level that only required you to spend $450 months earlier?
-- The death of the U.S. Dollar has been greatly
exaggerated. Believe it, or not... I don't like the principle
of Fiat Currency any more than you, or any other card
carrying gold bug does. But, unlike you, I realize the
there is no other currency that presently can replace
it. And if you're waiting for the return of the gold
standard any time soon... good luck. All the U.S. Dollar
has to be... is the "best of the worst" of all the other
Fiat currencies... and that's doesn't take much.
There is no replacement on the horizon.
-- Gold bugs seem only to see things one way. When they
saw the Oil:Gold ratio… they saw only one outcome. Gold
closing the gap to oil and moving ever higher. Instead, Oil
collapsed and gold folded.
-- Hard core bugs won’t even face reality. The collapse
of the HUI gold bugs index from 401 to 280; is the equivalent
of the DOW collapsing 3,559 index points! If the DOW
collapsed 3,559 points and traders came on CNBC telling
the public – not to worry, that the bull market was still in place
…they’d be laughed off the air. But, yet that’s what gold bugs
are doing here. Denial by any other name is still – denial.
-- And you want to hang your hat on “geopolitics.” Hmm?
Oil is the best barometer of Mid-East unrest and what has
Oil done? It’s collapsed. Gasoline has collapsed, as has
Natural Gas. But, yet bugs huddle in denial and hope for
Armageddon.
-- U.S. Deficits are falling and the U.S. Dollar is rising.
We finally have a U.S. Treasury Secretary with some
gravitas with both the markets and the global Central
Bankers. But, yet gold bugs live in denial.
-- When Amaranth & Mother Rock blew up, did any of the
gold bugs stop and think that just maybe; like the very next
day… that hundreds, if not thousands of traders would be
hauled in to meetings and have their positions in commodites
put under a microscope? Did you think that maybe, just maybe
…there would be some “de-leveraging” of the commodity trade?
-- And poor Warren Buffett. You held him up as your Champion
when he made his massive short bet against the US Dollar and
accumulated a hoard of Silver. But, when he closed his Dollar short
announced that he had sold his Silver… you chastised him. And you
wonder why I keep bringing up the See No Evil, Hear No Evil, Speak
No Evil analogy?
-- Bugs refuse to think outside the box. Here’s another example of not
respecting the other side of the trade. Bugs look at the Central Banks not
having sold their full quota of Gold as only being a bullish signal. The other
way of looking at it, is that they’ve still got a helluva lot of gold to unload
should they want to.
-- Another reality is the shift of power that may come with the 2006 & 2008
elections. Bugs failed to price this into their bullish equation, but the market
did not.
Virtually every catalyst for gold has either turned the other direction, or has
failed to rally gold. We just saw Iran unleash Hezbollah to fire rockets into
Israel. We then saw Israel invade Lebanon. Iran is ignoring threats from the
U.S. and the U.N. North Korea is testing Nukes… and the US Dollar, not
Gold has rallied.
The question that all the gold bugs who have been calling bottoms since May;
should have asked themselves is this:
Is this correction one of time, the tape (price), or causation?
Time-wise… it’s been nearly 6 months.
Price-wise…it’s been 100-120 index points on the HUI and $120-$150
for the price of Gold.
Presently, it doesn’t appear that either time, or price are driving this correction.
And that’s every bugs nightmare…because that leaves – “causation.”
And that “causation” was the massive speculation that started after
the twin strikes of hurricanes Katrina & Rita. If the correction in gold
needs to take out that entire speculative move… there’s still a long way to go.
The chart below…could be forming the right shoulder of every gold bugs worst nightmare.
Denial by any other name... is still denial.
SOTB |
