Gold! WTF????

Yuma · May 14th, 2010, 03:33 PM

Quote:

Newsletter says gold ETF overbought
BOSTON (MarketWatch) -- The ETF Review, a newsletter from Investors Intelligence, on Friday said it is closing its long position on SPDR Gold Shares . The gold ETF "has accelerated to new highs over the week with the flight to safety," the newsletter said. "However, momentum is now nearing a similar overbought level as per late November last year. On that occasion the market topped out and collapsed spectacularly. Gold futures are up ahead of the U.S. open and we will take profits on that strength today." SPDR Gold Shares, which holds more than $48 billion in assets, was up 12.4% year to date through Thursday's close, according to FactSet Research.

This week a rare event occurred. I have always been taught that Gold and the Dollar move inversely to each other. When the Dollar is up, gold goes down. This week for the first time I can remember, the dollar AND gold BOTH went up, and big, too!

Watching the Kudlow report right now, and some analysts are saying to buy gold, while others are saying it's a bubble about to burst, thus the article I quoted above. Where do you guys think gold is going?

82CardsGrad · May 14th, 2010, 03:39 PM

Quote:

Originally Posted by Yuma

This week a rare event occurred. I have always been taught that Gold and the Dollar move inversely to each other. When the Dollar is up, gold goes down. This week for the first time I can remember, the dollar AND gold BOTH went up, and big, too!

Watching the Kudlow report right now, and some analysts are saying to buy gold, while others are saying it's a bubble about to burst, thus the article I quoted above. Where do you guys think gold is going?

It was all but cemented today that Europe is a mess and growth there will be virtually nonexistant...
Many believe the same holds true for the U.S. as well...
Technically, that would spell trouble for equities, as well as the dollar - particularly since we are heading for debt and deficit levels nobody ever dreamed of...
Hence, one would think Gold prices would climb. But, who knows now with gold at these levels... who knows what other games will be played between Washington and Wall Street...

Yuma · May 14th, 2010, 03:47 PM

Quote:

Originally Posted by 82CardsGrad

It was all but cemented today that Europe is a mess and growth there will be virtually nonexistant...
Many believe the same holds true for the U.S. as well...
Technically, that would spell trouble for equities, as well as the dollar - particularly since we are heading for debt and deficit levels nobody ever dreamed of...
Hence, one would think Gold prices would climb. But, who knows now with gold at these levels... who knows what other games will be played between Washington and Wall Street...

I would be in Gold, but like you mentioned, the price already seems really high to me, except people like the Saudis and China I don't believe really want dollars, but compared to other currencies, the dollar looks good. The least dirty turd. LOL! I believe our stocks are the same. However, just a few months ago everyone was saying buy foreign stocks and get out of US stocks, and in just a short time, now everyone is saying US investments are safer compared to Europe, and even China because China may be overheating. Even Australia has been raising their rates, now 6 times in a row, because they are experiencing inflation. No wonder people are flocking to gold when you can't figure out what is going to happen next! Just the price of gold now, and the money pouring in, is it a big bubble, or a real safe haven?

Yuma · May 14th, 2010, 03:52 PM

Quote:

News
Rescue your retirement from inflation's threat

Take steps now to save your portfolio from drowning

By Sam Mamudi, MarketWatch

Last Update: 5:26 PM ET May 14, 2010

NEW YORK (MarketWatch) -- The global recession had largely muzzled inflation's bite, but actions being taken to cure the developed world's economic ills could revive threats to bond investors and savers and spoil many Americans' retirement plans.

Record levels of government spending in Europe and the U.S. to prop up flagging economies are seen by many as a recipe for inflation -- Public Enemy No. 1 of bond holders and bank accounts. High inflation hurts savings-oriented strategies because rising prices erode consumers' purchasing power, and consequent interest-rate hikes slam fixed-income investments.

"Keeping your assets in cash isn't going to get it done for you, because they won't be able to hold their value when there's inflation," said James Shelton, chief investment officer of Kanaly Trust in Houston.

Yet savers don't have to wait for the inflation torpedo to hit. Some effective strategies can hedge against rising prices and even take advantage of an inflationary environment.

For example, investors lately have been saying "auf wiedersehen" to the euro and "good day" to gold (GLD) , which is a traditional hedge against inflation.

Many investors are alarmed that the European Union's attempt to rescue Greece and other Mediterranean countries from default, coupled with massive stimulus spending in the U.S., is flooding the global financial system with money and will stoke inflation, kick up interest rates, further weaken the euro and, ultimately, strain the U.S. dollar. ($DXY)

Bond-fund giant Pimco is among the powerful voices raising concern that inflationary pressures could build over the next three to five years.

"[We] could witness the impact of increasing monetization of debt, gradually rising inflation rates and a worsening of inflationary expectations," noted Mohamed El-Erian, Pimco's co-chief investment officer, in a global markets outlook published on May 12.

Whip inflation now

Under those circumstances, one highly effective way to inflation-proof your portfolio would be to buy Treasury Inflation Protected Securities, or TIPS, government-backed bonds that are linked to inflation. So-called real assets such as gold or other commodities, whose returns are historically pegged to rising prices, also would be attractive.

"TIPS tend to be very steady, whereas gold has a lot more volatility," said Chris Hobart, chief executive of Charlotte, N.C.-based Hobart Financial Group. Hobart's firm manages money for individuals who are mostly between the ages of 55 and 75. He said he's already talking about inflation with his clients.

Hobart said he also recommends owning shares of companies that stand to benefit from rising prices, such as those in the oil and gas, food and health care sectors.

Shelton of Kanaly Trust, which manages about $2 billion in assets, echoed Hobart's approach.

"Real assets [such as commodities and housing] are the only thing that will hold value if there's inflation," he said.

Beyond the markets, there are other ways to take advantage of rising prices. People should, for example, think about remortgaging their house, said Laurence Kotlikoff, an economics professor at Boston University.

"It's generally a good idea to pay down a mortgage as soon as possible," he said. "But a long-term mortgage can be a good hedge against inflation because the real value of repayments will decline."

Kotlikoff said he'd then invest the extra money in TIPS.

Another strategy to whip inflation is to make the most of rising interest rates by "laddering" a bond portfolio. In this way, interest-rate risk is spread across short-, medium- and long-term bonds, allowing investors to reinvest at higher prevailing rates as bonds mature.

Hobart said he's not looking at bond ladders today, but added that as interest rates rise, the strategy will become "a more viable option."

"When you have higher rates, there's no need for retirees to head into riskier assets to generate returns," he said.

Work and save

Those heading toward retirement should also keep in mind their Social Security checks. For one thing Social Security income is linked to inflation. But thinking strategically about when to start payouts makes a big difference.

For example, delaying when the checks are claimed can boost income -- making a first claim at 70 years old rather than at age 62 means the payout will be about 75% higher, Kotlikoff said.

"People should do everything they possibly can to wait until they're 70 to collect retirement," he added.

That means working longer -- a rising trend that more people should embrace, say retirement experts.

Steve Utkas, who oversees Vanguard Group's Center for Retirement Research, cited a study that found 21% of Americans age 70 to 74 were working in 2007, compared to 15% 20 years earlier. He noted that more than half of households of people in their 60s were earning income from work.

The benefit is twofold -- money comes in and nest eggs remain untouched -- and can make a meaningful difference in lifestyle: one study found that delaying retirement by three years can halve any shortfall in savings that a retiree faces.

Kanaly Trust's Shelton said that the threat of inflation has steered him towards assets that can provide generous cash flows, such as energy master limited partnerships. These products have assets in energy industry infrastructure, such as pipelines. Not only would the sector rise with inflation, but the energy MLPs have high yields -- recently in the 7% range.

Another income-generating product is an annuity, which offers guaranteed income in exchange for a lump sum paid upfront. Perhaps prompted by uncertain markets, use of annuities and similar products is on the rise: a study by Cerulli Associates found that almost one-third of financial advisers increased their use of guaranteed income streams last year.

With the fear of looming inflation, it may be wise to invest in inflation-linked annuities rather than traditional fixed annuities. But as John Ameriks, head of Vanguard's investment counseling and research group, noted, because inflation-linked annuities are built to increase payments as the years pass, their initial payouts are smaller than those of their traditional counterparts.

Ameriks also said that while TIPS can help lessen the ravages of rising prices, there's a chance there'll be inflation shocks in the future -- unexpected jumps in the rate of inflation -- and ordinary money-market funds would help in such a situation. It's likely the Federal Reserve would respond to such a shock by raising short-term interest rates, a move from which the biggest beneficiaries would be money-market funds.

Off-target retirement funds

One popular investment product may face problems in a world of rising inflation and rising interest rates: target-date retirement funds. These funds usually start heavily tilted in stocks but as they near maturity -- on or around an investor's retirement age -- they rotate more into bonds. The timing of when that happens could be crucial.

"If interest rates are climbing, then it becomes harder to make money in bonds and investors need to look closely at their target-date funds to see what their bond exposure is," said Jim Hardesty, chairman of Hardesty Capital Management in Baltimore, which runs about $800 million. "The question is will these funds be more proactive about dodging the bond bubble than they were about avoiding the 2008 market dive."

Many target-date funds surprised investors with their poor performance in late 2008 in part because their stock allocations were high.

Ameriks also sounded a note of caution against a strategy geared solely towards beating inflation. For instance, he said that long-term returns suggest that real assets typically match inflation but don't outpace it, and while bond ladders can work if rates are high enough, they aren't particularly liquid.

Ameriks added that if inflation doesn't rise significantly, TIPS will provide lower returns than most other bond offerings.

"There's a danger in focusing too much on one particular risk," he said.

I may get some TIPS or try and find an ETF that invests in them. Still gold is mentioned in this article on the same day the other article says beware!

conraddobler · May 15th, 2010, 01:24 PM

I believe we're in for a few more rounds of this, up and down gold thing.

Me I'm partial to silver myself.

When people frenzy over gold, then you can get whacked hard, plus if the market does dump and causes any kind of margin calls gold can get destroyed fast.

I'd beware anything right now, because it's all part of a very rigged game.

LoyaltyisaCurse · May 15th, 2010, 06:46 PM

All I know is that I am investing in commodities...

DWKB · May 16th, 2010, 08:41 AM

The simple answer I would think is that the Euro collapsing causes both Gold and the Dollar to go up.

CaptTurbo · May 16th, 2010, 05:33 PM

They just unveiled in Dubai a gold vending maching to buy grams.

If that isnt a sign of a top what is?

conraddobler · May 16th, 2010, 06:25 PM

Quote:

Originally Posted by swd1974

They just unveiled in Dubai a gold vending maching to buy grams.

If that isnt a sign of a top what is?

That's pretty much as good as it gets for said indicator.

Something I heard in relation to the Euro really gave me pause, they were talking about how IB's like Goldman could create nearly infinite shorts on a currency by just creating new derivatives.

When I heard that it really was a wow moment.

Gold can be taken out on a whim, as long as the paper market exists and isn't destroyed, you have to beware the games.

I believe at some point all this derivative nonesense will cease but that could be a very long time from now, until then, it's all a rigged game IMO.

BACH · May 17th, 2010, 05:03 AM

Quote:

Originally Posted by 82CardsGrad

It was all but cemented today that Europe is a mess and growth there will be virtually nonexistant...
Many believe the same holds true for the U.S. as well...
Technically, that would spell trouble for equities, as well as the dollar - particularly since we are heading for debt and deficit levels nobody ever dreamed of...
Hence, one would think Gold prices would climb. But, who knows now with gold at these levels... who knows what other games will be played between Washington and Wall Street...

How exactly do you conclude that?

You forget that Europe cannot be compared as a whole when it comes to the economy.

Concluding that Germany, Denmark, Holland etc. are in the same situation as Greece, Spain etc. would be as concluding the US is the same as Cambodia, because they also use US dollars as currency

jefftheshark · May 17th, 2010, 06:39 PM

Perhaps it is my contrary nature, but I suspect that the current correlation between gold and the dollar is going to be short-lived. While the world is preparing for a hyper-inflationary whirlwind, the bond markets and the dollar are telling us to be looking out for something totally different. IMHO, we are far more likely looking at the second wall of the deflationary hurricane that first struck in 2008.

These are the reasons I think deflation is the next shoe to drop:

Credit is still contracting.
Wage rates are stagnating, unemployment remains stubbornly high.
Money supply growth is vanishing (a lack of liquidity certainly appears to be more responsible for the flash crash than somebody's fat finger)
The U.S.dollar is strong, and getting stronger.
Commodities like oil and copper seem to have peaked.
Home prices appear poised to tumble again.
The VIX is rising
Retailers are slashing prices, as are manufacturers

My opinion is that gold owes its rise more to the uncertainty in the acts of government than what actual inflation would suggest. It would seem that there are many who are looking at gold as a replacement for the dollar as some kind of reserve currency replacement for when the dollar collapses, but in reality, why would the dollar collapse? It is still the best of a lousy breed, and remains the first choice in a flight to safety.

This is not to say that gold doesn't have a place in everyone's financial plans, but there does seem to be somewhat of a bubble forming. Personally, I would rather miss out on the last profits to made on this upswing, and look for a better entry point if/when it returns to more reasonable levels.

JTS

conraddobler · May 17th, 2010, 07:32 PM

Quote:

Originally Posted by jefftheshark

Perhaps it is my contrary nature, but I suspect that the current correlation between gold and the dollar is going to be short-lived. While the world is preparing for a hyper-inflationary whirlwind, the bond markets and the dollar are telling us to be looking out for something totally different. IMHO, we are far more likely looking at the second wall of the deflationary hurricane that first struck in 2008.

These are the reasons I think deflation is the next shoe to drop:

Credit is still contracting.
Wage rates are stagnating, unemployment remains stubbornly high.
Money supply growth is vanishing (a lack of liquidity certainly appears to be more responsible for the flash crash than somebody's fat finger)
The U.S.dollar is strong, and getting stronger.
Commodities like oil and copper seem to have peaked.
Home prices appear poised to tumble again.
The VIX is rising
Retailers are slashing prices, as are manufacturers

My opinion is that gold owes its rise more to the uncertainty in the acts of government than what actual inflation would suggest. It would seem that there are many who are looking at gold as a replacement for the dollar as some kind of reserve currency replacement for when the dollar collapses, but in reality, why would the dollar collapse? It is still the best of a lousy breed, and remains the first choice in a flight to safety.

This is not to say that gold doesn't have a place in everyone's financial plans, but there does seem to be somewhat of a bubble forming. Personally, I would rather miss out on the last profits to made on this upswing, and look for a better entry point if/when it returns to more reasonable levels.

JTS

I think you're right.

I work in housing, credit is contracting at a fearsome pace, and there is a tidal wave of defaults still comming.

All the stimulus was mostly removed at once.

All you listed is further evidence.

Finally, the banks are all making money, they have a guide, it's called the FED, the FED IMO is telling it's bestest buddies, ok you dumbasses, I'm going to make this real easy for you, now follow along and don't be stupid, you got a lot of money to make up to get back to solvency.

That's not a fact, just my opinion on the matter.

So if you add it all up, and the fact we just got out of refund season with stimulus checks for housing bouncing around, I expect in a few more months the well will again run dry and down she goes.

All the while the bond market benefits again.

Yet one day, it's time will come too, and that day is the end of this entire run, but it is not this day, not yet.

This is a giant game of Mario brothers, where you're on a large catwalk that has falling logs and false floors and assorted monsters.

If you're good and you know the game, now is the time to make a run at the all time high score.

HFT will eventually destroy everyting, derivatives will eventually go boom and one day we'll be sitting in a smoldering ruin ripe for a new bigger one world currency but until then, it's game on.

82CardsGrad · May 17th, 2010, 08:30 PM

Quote:

Originally Posted by BACH

How exactly do you conclude that?

You forget that Europe cannot be compared as a whole when it comes to the economy.

Concluding that Germany, Denmark, Holland etc. are in the same situation as Greece, Spain etc. would be as concluding the US is the same as Cambodia, because they also use US dollars as currency

First - where did I "conclude" that Germany, Denmark and Holland are in the "same situation" as Greece, Spain, etc...??

Second - The EU can most definitely be "compared as a whole" in economic terms. The EURO took care of that. Sure, individual countries within the EU can have - and do, their own respective micro economies... However, my point, which was clearly lost on you, was that economists predict sluggish, sub-par economic growth in Europe for several quarters to come...

82CardsGrad · May 17th, 2010, 08:32 PM

Quote:

Originally Posted by jefftheshark

Perhaps it is my contrary nature, but I suspect that the current correlation between gold and the dollar is going to be short-lived. While the world is preparing for a hyper-inflationary whirlwind, the bond markets and the dollar are telling us to be looking out for something totally different. IMHO, we are far more likely looking at the second wall of the deflationary hurricane that first struck in 2008.

These are the reasons I think deflation is the next shoe to drop:

Credit is still contracting.
Wage rates are stagnating, unemployment remains stubbornly high.
Money supply growth is vanishing (a lack of liquidity certainly appears to be more responsible for the flash crash than somebody's fat finger)
The U.S.dollar is strong, and getting stronger.
Commodities like oil and copper seem to have peaked.
Home prices appear poised to tumble again.
The VIX is rising
Retailers are slashing prices, as are manufacturers

My opinion is that gold owes its rise more to the uncertainty in the acts of government than what actual inflation would suggest. It would seem that there are many who are looking at gold as a replacement for the dollar as some kind of reserve currency replacement for when the dollar collapses, but in reality, why would the dollar collapse? It is still the best of a lousy breed, and remains the first choice in a flight to safety.

This is not to say that gold doesn't have a place in everyone's financial plans, but there does seem to be somewhat of a bubble forming. Personally, I would rather miss out on the last profits to made on this upswing, and look for a better entry point if/when it returns to more reasonable levels.

JTS

Quote:

Originally Posted by conraddobler

I think you're right.

I work in housing, credit is contracting at a fearsome pace, and there is a tidal wave of defaults still comming.

All the stimulus was mostly removed at once.

All you listed is further evidence.

Finally, the banks are all making money, they have a guide, it's called the FED, the FED IMO is telling it's bestest buddies, ok you dumbasses, I'm going to make this real easy for you, now follow along and don't be stupid, you got a lot of money to make up to get back to solvency.

That's not a fact, just my opinion on the matter.

So if you add it all up, and the fact we just got out of refund season with stimulus checks for housing bouncing around, I expect in a few more months the well will again run dry and down she goes.

All the while the bond market benefits again.

Yet one day, it's time will come too, and that day is the end of this entire run, but it is not this day, not yet.

This is a giant game of Mario brothers, where you're on a large catwalk that has falling logs and false floors and assorted monsters.

If you're good and you know the game, now is the time to make a run at the all time high score.

HFT will eventually destroy everyting, derivatives will eventually go boom and one day we'll be sitting in a smoldering ruin ripe for a new bigger one world currency but until then, it's game on.

Yes, and Yes...

jefftheshark · May 18th, 2010, 01:32 PM

Of course, you always need to be on the watch for black swans, and one certainly came wandering by today.

It is looking like Germany has outlawed the naked short selling of gold, along with many other financial instruments; which if I'm reading this correctly would be very bullish for PMs.

On the other hand, this should hurt the Euro even more - which could make it somewhat of a wash.

Deflation is still on the march, however. But of course that's just MHO.

JTS