"welcome to the NWO" ==> Velkomin á NWO
"all your fishes be ours" ==> öll fiskimið þín okkar
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All Quiet On The Gold Front
Meanwhile, the financial media are taking some notice of Gold, but most of that notice is to "warn" that the bull is getting a little tired at such lofty levels or to point out that compared to lots of other things, Gold hasn't really done all that well this year even in $US terms. It is pointed out that while the $US Gold price is up about 20 percent so far this year, the oil price is up over 80 percent. What is not mentioned is that oil is still nearly $US 70 or about 46 percent below its highs of July 2008 while Gold has been cycling around its all time highs for most of October.
Then there is the concern about the HUGE open interest on the US Gold futures markets. It is true that total open interest rose above the 500,000 contract level in early October and has since been as high as 517,000. It is also true that Gold open interest was above 500,000 contracts on a nearly continual basis from October 2007 to March 2008 and peaked at just under 600,000 contracts in January 2006 - with Gold still $US 100 below the peak just above $US 1000 it reached two months later.
There have been stories talking about Gold being nowhere near its January 1980 highs in "inflation adjusted" terms. The US Labor Department has an "inflation calculator" on their website. According to this calculator, it would take a Gold price today of $US 2287 to equal in purchasing power the $US 873 intraday high Gold reached in January 1980. Enter John Williams of shadowstats.com. Mr Williams has made the same calculation, but he used the exact same methodologies that the US government used to "measure" price inflation in 1980. If the US Labor Department had not "adjusted" their methods in the interim, the US government would long since have gone broke abiding by its "COLA" (Cost Of Living Adjustment) clauses.
Using the 1980 methodology, Mr Williams calculates a Gold price of $US 7150 as being necessary today to match those January 1980 highs. We used the same method to calculate what the equivalent of the Dow would be today to its level in January 1980 of 870. The number comes out at 7125. Makes sense actually, seing as how the Dow/Gold "ratio" in January 1980 was almost exactly 1:1.
As for the hypothetical 7125 level, the Dow was actually lower than that by a fair margin as recently as last March.
The other problem which is often pointed out when Gold is at or near historic highs is that the price has risen too far above its long-term trend. We decided to have a look at this one for ourselves. For comparison, we took the three significant highs in the $US Gold bull market so far and compared them with the level of the 20 and 40-week moving averages at the time.
Gold hit $US 721 in May 2006 and didn't substantially exceed that level until October 2007. Gold hit $US 1004 in March 2008 and didn't substantially exceed that level until this month. For a third significant high, we simply took Gold's spot future close on October 23 - that was $US 1056.40.
* In May 2006, the gold price peaked at a level 18.1 percent above its 20-week moving average (MA) and 25.7 percent above its 40-week moving average
* In March 2006, the comparative numbers were 12.5 percent and 20.6 percent
* At present, Gold is 7.7 percent above its 20-week moving average and 9.9 percent above its 40-week moving average
Clearly, at present prices the discrepancy between the Gold price and the long-term trend is a long way below where it was at Gold's two previous peaks. And don't forget, both these peaks did NOT represent the top of the bull market. We have no idea where the top of this bull market is going to be.
As we said, it has been a quiet week for Gold. We won't see any form of real "fireworks" until Gold starts going up sharply against all major currencies, not just the US Dollar. We may have seen a glimmer of that beginning this week as Gold rose sharply against the Japanese Yen. But it is still a long way below its February 2009 highs when "priced" in the commodity currencies which have become the major beneficiaries of what is now a US Dollar carry trade.
the-privateer.com |
