Get ready for some cheap gold!

[KDave]

According to this article from Market Oracle, the gold market will soon enter 'Annihilation Phase' where everyone will sell their gold all at once in a classic 'rush for the exits' scenario. 

 

If this prediction comes true, this is incredibly good news for the good people of this forum. Imagine the bargains HGM will be producing on a daily basis! 

 

http://www.marketoracle.co.uk/Article51610.html

 

An interesting article although incredibly bearish, full of odd assumptions and almost too self satisfied to take seriously. The author made the broad statement that gold was entering a bear market 2 years ago and is strengthening his call via some convenient hindsight charting as far as I can tell. Shameless really. The first paragraph contains my favourite ignorant statement;

 

"The third stage would be a wrenching decline that would ultimately reach levels so shocking that it would cause the destruction of the gold investment class."   

 

The chart analysis is interesting at least, even if that conclusion is utter nonsense. 

 

I should say that I am personally indifferent to the short term outlook - up or down, as I am in gold for the very long term. However, further falls are looking more likely than not imo. If the article is right then trying to recognise the bottom of a market is usually very difficult and given the time frames I am working to, it is better to keep buying and hope to benefit from more ounces for the same fiat. 

 

 

 

 

 

 

[Bumble]

I found that article a little confusing, because the author keeps skipping between talking about the price of gold and the price of gold mining stocks. Granted these are correlated, but they are hardly the same thing. His main point seems to be that technical analysis indicates we are in a bear phase and that the next stage will be capitulation, with the price of gold falling to $850.

For my part, I don't set much store by technical analysis, but for what it's worth I agree that the current momentum is downward and that we are likely to see sub-$1000 gold before any return to an upward trend. If we steer by fundamentals rather than technicals, then the following points are pertinent:

1. A gold price moving below $950 will see some miners start to experience a production cost higher than the selling price. Even allowing for hedging, this is likely to lead to reduced supply if the price remains low for an extended period.  

2. Demand for physical gold remains high in China, India and Russia. Even if western buyers capitulate, it is unlikely to affect demand from these countries. Most of the developed countries of the west have never experienced hyperinflation and destruction of currency in living memory and this makes them complacent. In asian, south american and african countries where this has happened, people understand the value of gold.

3. The gold price is determined by 'paper' trading, not by supply and demand for the physical metal. The volume of paper trading exceeds that of metal trading by approximately 100:1. This makes the gold price easy to manipulate by big market players, and there is plenty of evidence of bear raids. If the day comes when holders of physical gold are unwilling to part with it at the paper price, there will be defaulting on contracts and a huge short squeeze. This could cause a massive upswing in the gold price and trip the circuit breakers for several days running.

4. Gold is usually seen as attractive to hold if price inflation is rising and interest rates are low. Markets appear to have already priced in the expectation that the Fed and the BoE will start to raise rates soon. If this rise doesn't materialise, or if it has to be reversed because of adverse economic conditions, gold will resume its attraction. As to inflation, the Fed and the BoE have started to talk about it as though it were a good thing and that 2% price inflation is a target to achieve, rather than a ceiling to stay under. If the central banks are determined to cause inflation then I strongly suspect that sooner or later they will succeed.

5. The countries of the developed world now have unprecedented levels of debt and unfunded liabilities, unprecedented levels of fiat money supply, unfavourable age demographics, and little obvious prospect of returning to a strong and sustained period of economic growth. As such, we are in completely uncharted territory and anybody who makes economic predictions is just guessing. Against this background, gold is attractive because of its traditional status as a safe haven asset.

6. Any one of a number of events, such as a country defaulting on its bonds, or a major bank failing, or a military incident in the middle east, could lead to a panic sell-off in bonds, stocks and real estate. Gold traditionally thrives because it is a highly concentrated and portable form of wealth with no counterparty risk.

Conclusion: nobody knows how low the price will go. If you are a trader, by all means expect the price of gold and miners to continue falling. If you are an investor looking to diversify and reduce your exposure to risky assets, by all means continue to buy physical gold and benefit from cost averaging when the price falls. As to the miners, they look like a falling knife right now.

[HawkHybrid]

the article is written purely in a traders point of

view. it does not take into account selling coin

variations when dealing with physical.

I don't expect to see forum members competing

to sell the good stuff at spot should capitulation

arrive. 

 

HH

[KDave]

Bumble all excellent points - the author of the article clearly doesn't take any of that into account and focuses almost entirely on hindsight charting to support his call. 

 

The scope of the article is terrible - had I any shame I would feel embarrassed to post it here. However, seeing a wide array of view points evens out natural confirmation bias and helps reduce the urge to follow the crowd when things get ugly. Fore warned is fore armed so to speak. I posted it as it is good to see these alternative view points and it demonstrates just how bearish some people are expecting the situation to become for gold. I for one will be taking advantage should it come to pass. 

[SilveriteFX]

An interesting article indeed. @Bumble covered all the major points very well.

 

We are fast moving towards the end of a 30 to 40 year currency cycle and those who have accumulated real commodity wealth towards the end of such a cycle have always faired better after the re-set, throughout history.

 

The 'elite' / banksters want to accumulate as much physical gold and silver wealth as they can. They know that the masses will sell low and buy high.

 

Forget the markets. Forget paper currency. This a great time to buy gold and silver, in my honest opinion and you can even get more for your 'money', which is kind of the point really... 

 

 

 

 

- "Quick, better get out of the market before you lose your shirt" and "keep stacking that worthless FIAT paper currency high".

 

 

When Money Is Corrupted - Hidden Secrets Of Money Ep 5

 

- https://www.youtube.com/watch?v=OQWMd_NPSBA