Gold Investment Thread

C-Note

Hummingbird
Other Christian
Gold Member
Just screen grab the graphs and post them if you don't mind. I'm inclined to agree with that thesis though.
Aditya Pattanaik <[email protected]>
Cc:Rick Rule

Fri, Jul 15 at 12:54 PM

The note below by Sprott’s market strategist (Paul Wong) may be of interest if you hold investments in the Precious Metals equities segment.

I am also appending two charts here…on the Fed being stuck between a rock and a hard place. The inverted yield curve chart, over the last 40 years, has been strongly correlated with a near term pause in rate hikes ( within 50bps on the inversion ) and has been a reliable signal of an impending recession. The yield curve has inverted twice this year. The last time it was this negative was 2007. On the other hand, we have not seen inflation at these levels over the last 40 years and the Fed claims that it will continue to use its “tools” to fight inflation. The strong labor market, large corporate profit margins, corporate cash on hand stats etc. point to an economy that can tolerate further tightening. The credit markets paint a different picture.

The recent tightening of monetary conditions has resulted in a drawdown of the total market capitalization of US equity and fixed income markets by ~24 Trillion USD. The drawdown in 2008 (GFC) was ~9 Trillion USD.

1657928781005.png

From a market price action perspective, the last few weeks have been extraordinary.

From the June 8 high, BCOM (BBG Commodity Index) fell by -20% in less than 4 weeks, the sharpest 4-week drop since the GFC (credit system near-collapse) and March 2020 (oil went negative). For an equity reference, XME (Metals & Mining) fell by -40%, and XOP (O&G Expl & Prod) fell by -37% from June 8. In the past 4 weeks, there was no comparable economic or market calamity to explain this collapse from a fundamental point of view.

This price action was an example of all the challenging market conditions: enormous relative size of passive and quants vs active funds, the dominance of CTAs in trading flows, and dealer hedging flow, all amplified by algo technical buying/selling into one of the worst market depth conditions ever. It is hard to believe it could happen until you see it happen. This selling wave was a near-perfect storm of central bank policy, technical factors, flow dynamics, and poor trading liquidity. The latest leg of USD strength, driven by relative yield spreads and currency volatility, helped grease the slide.

Thematic positioning of inflation and rates re-pricing higher has branched out to recession as exemplified by EDZ2EDZ3 (Eurodollar futures spread) which is now pricing in three rate cuts sometime in 2023 (recession). The final catalyst was the terrible May CPI report, and copper is now tracking EDZ2EDZ3’s recession call. With breakeven yields also rolling over hard, the market has priced in a recession, accelerating fund outflows and market depth falling even further.

The CPI print on June 10 marked the beginning of 75 bps rate hikes and a sharp increase (or the final straw) in recession expectations. What followed was an intense mass liquidation event that I had not seen since 2008 and March 2020. These were some of the largest waves of selling (CTAs and others) into one of the poorest market depth conditions ever with eye-popping consequences. If anyone ever needs an example of selling into a vacuum, this would be a good one.

1657928860962.png

For gold, it was like being caught in an event horizon of a black hole. With near the entire market in outflow mode (equities, bonds, commodities, and even long volatility products), gold as a safe-haven asset did not matter in those few weeks. We had seen similar trading actions in 2008 and 2020 when liquidity conditions forced the selling of all assets. While the song may be different (cause of liquidity destruction), the dance is the same (sell everything). In other words, we are in the everything bear market (bad news), but the good news is that it usually does not last too long (the world tends to end). What is needed is for some liquidity to return so there can be a rotation to defensive or safe-haven (rotation vs puking). The Eurodollar futures spread is already pricing this liquidity return but at an unknown date in 2023. The EDZ market is $ trillions in size; it matters.

ST for gold, it is challenging to call except to say it is incredibly oversold. Below is a chart with my best guess, given what I see developing. The uptrend from 2018 is now busted. If the LT pattern is bullish, I still believe it is, there should be a consolidation A-B-C pattern. The issue for me is that C-leg looks too short in time; there should be some symmetry with the A-leg. The lower red dashed line is ~$1675 and sits nicely between the 50/38 Fibonacci lines. I will skip the other technical indicators as they are all very oversold.

1657928905291.png

Gold equities are even more oversold. Below is a chart of GDX as a reference. There is a major support level at ~$25.75 and an opening gap at $26.25, which GDX filled last week and moved higher. GDX is also at the bottom extension of the blue down-channel.

1657928942311.png

Here are some Sentiment Indicators that have proven helpful in the past, but I underscore again to the state of illiquidity. They are at hold your nose and buy readings that can work as long as instant gratification is not a criterion.

1657928979871.png

This graph below is one of my favorite types of indicator; the positioning wipe-out. The old trader adage that lows are made when the last seller has been exhausted (and not when it is cheap) is very close to happening.

1657929008391.png

I see the same dynamics building now as in prior cycles before a significant move higher for gold bullion, but the timing is far more complicated. As much as CTAs and the types have pounded gold and other resources/commodities lower, they can just as quickly flip and push everything higher under the right conditions.


 

Liviu

Robin
Orthodox
This is cope - gold is not even a safe haven. The fiat price of gold is what it was 10-12 years ago while almost everything else went up. Investing your money into the s&p500 or property would have yielded same or better results during the same time frame. Just check out the math. s&p500 in 1970 was $83 and now 3790 today was $4712 in Dec. Even the non-gold commodities do better than gold because of manipulation.
I think we clarified the subject investment in gold or something else. The fact that you found two points in time when gold has the same fiat price doesn`t cancel the property of gold of stocking value in harsh times. This is proven many times in history. What you don`t take in consideration is that in US especially, in the last 40 years, wasn`t these days inflation and wasn`t something similar with what happens now, not even in 2008 financial crisis. We`ll see that almost nothing from what most of living people remember will start to happen from now on financial markets. And we`ll talk in a few years about it if we`ll still be here.
 

Liviu

Robin
Orthodox
Show me a way to buy actual physical gold without losing a huge percentage of the investment, and I'm in.
I don`t know what are the costs of keeping the gold in bank vaults if this is your concern. But if you could avoid those costs (hiding it in a personal vault, no-one knowing about it) the costs of opportunity are no more than 5% for the most marketable coins and close to 3% for the most marketable ingots. Of course, can be some postal and assurance costs (if you order the gold) but those are neglectable related to the total amount.

The inflation of USD was about 7% for the last year, the biggest in 40 years and 4-5% calculated for the last few years. The inflation of EUR was 8.5% for the last year , the biggest from foundation of EUR, more than twenty years ago. So is common sense, considering all the planet enters slowly in recession with no economic raising in either Europe, US and China in the next five years to preview an average inflation for these five years of at least 3% in both US and Europe, more sure an average inflation of 4-5%.

Scenario with an inflation of 3% average for next five years

If you buy bonds with 2% interest now you will have after five years a nominal value increase of 10 -11% of your initial amount.

If you buy best marketable investment coins, you will have after five years 15-16% nominal value increase (gold raises with inflation in price) and supposing you want your money back and sell them and recuperate the money you will lose almost 5% and you will have thus 10-11% nominal increase of your initial money breaking even with the investing of the same amount in bonds. But attention: this happens only if you want your money back then. Otherwise, even with 3% average inflation gold beats bonds in five years almost sure.

If you buy best marketable ingots, you will have after five years 15-16% nominal value increase and supposing you want your money back and sell them and recuperate the money you will lose almost 3% and you will have thus 12-13% nominal increase of your initial money

Scenario with an inflation of 4% average for next five years

If you buy bonds with 2% interest now you will have after five years a nominal value increase of 10 -11% of your initial amount.

If you buy best marketable investment coins, you will have after five years 20-21% nominal value increase and supposing you want your money back and sell them and recuperate the money you will lose almost 5% and you will have thus 15-16% nominal increase of your initial money

If you buy best marketable ingots, you will have after five years 20-21% nominal value increase and supposing you want your money back and sell them and recuperate the money you will lose almost 3% and you will have thus 17-18% nominal increase of your initial money

So, the key is to buy the best marketable investment ingots or coins not any kind of them.

Here, you have the Estonian successful company Tavex which shows on its site for selling in Romania the prices of both selling and buying for the the same items and the correspondent cut. You can see at the most sold coin in Europe, Wien Philarmoniker of 1 oz gold 99.9 that the margin is less than 5% and for the lingot Valcambi Suisse of 100 gr gold 99.9 that the margin is not much more than 3%.They give the margin if you enter on the items


Here you have the same company with the site for UK. Maybe is easier for you

 
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BURNΞR

Ostrich
Agnostic
I think we clarified the subject investment in gold or something else. The fact that you found two points in time when gold has the same fiat price doesn`t cancel the property of gold of stocking value in harsh times. This is proven many times in history. What you don`t take in consideration is that in US especially, in the last 40 years, wasn`t these days inflation and wasn`t something similar with what happens now, not even in 2008 financial crisis. We`ll see that almost nothing from what most of living people remember will start to happen from now on financial markets. And we`ll talk in a few years about it if we`ll still be here.

It's not just the recent past performance that is bad. That is not the only reason I outlined in my original post. It's the fact that as tech gets better they figure out cheaper ways to mine this and make it abundant pushing the price to 0 (human ingenuity). That and how the gold market is under what I see as complete lock by banks and governments using manipulative tactics to forever suppress the price of commodities like gold with paper markets. It's not just the price between 2 points in time I'm talking about (I am not a chartist), it's the fundamentals of gold which look very bad.
 

Liviu

Robin
Orthodox
It's the fact that as tech gets better they figure out cheaper ways to mine this and make it abundant pushing the price to 0
I think you contradict yourself a little bit. They figure out cheaper ways to mine the gold in order to diminishing the price of gold. Really ? If central banks bought massively gold, China stops any export of gold and Russia tripled his gold reserves lately do you think there are big chances that gold to devalue massively?

First, there are clear data that in the last period of human history the raise of demand for gold slightly outpaced the raise of gold on the market. This happened and still happens. And related to the alleged Uganda new gold , even if those reserves are so big, will take time to get out all the gold from there and in this time, the demand for gold will continue to soar. The current spot price of gold is the best story about gold from all. Period.
 

BURNΞR

Ostrich
Agnostic
I think you contradict yourself a little bit. They figure out cheaper ways to mine the gold in order to diminishing the price of gold. Really ? If central banks bought massively gold, China stops any export of gold and Russia tripled his gold reserves lately do you think there are big chances that gold to devalue massively?

First, there are clear data that in the last period of human history the raise of demand for gold slightly outpaced the raise of gold on the market. This happened and still happens. And related to the alleged Uganda new gold , even if those reserves are so big, will take time to get out all the gold from there and in this time, the demand for gold will continue to soar. The current spot price of gold is the best story about gold from all. Period.
Yes, really. It happens to all commodities I can think of, not just gold.

All that gold buying by India/China/Russia in the last 10-12 years and the price is somehow fixed, that's telling.

Even if it gets adopted as a reserve we all know it gets re-hypothecated, they run an opaque fractional reserve on it, and eventually abandoned.

I don't have a problem with gold. The issue is banks and governments have managed to effectively manipulate and suppress the price of it using complicated financial instruments which is why I'm not so enthusiastic about owning it. I would prefer a gold standard but this is just wishful thinking and not realistic in our clown world.
 

presidentcarter

Ostrich
Protestant
Gold Member
Yes, really. It happens to all commodities I can think of, not just gold.

All that gold buying by India/China/Russia in the last 10-12 years and the price is somehow fixed, that's telling.

Even if it gets adopted as a reserve we all know it gets re-hypothecated, they run an opaque fractional reserve on it, and eventually abandoned.

I don't have a problem with gold. The issue is banks and governments have managed to effectively manipulate and suppress the price of it using complicated financial instruments which is why I'm not so enthusiastic about owning it. I would prefer a gold standard but this is just wishful thinking and not realistic in our clown world.
And in your view, US equities priced in unlimited fiat are somehow...not fixed?

Nothing's perfect but like I keep saying, to view the coming 50 years equivalently as the last 50 years is a pretty 'normie' mentality. Something your Schwab broker would tell you to keep you from cashing out your high risk tech equities and getting into land, gold, cash, and consumer non-discretionary staples.

The system itself is collapsing and there are now near constant signs of this. The 'unlimited' debt buying programs recently announced by the ECB is one recent example.
 

BURNΞR

Ostrich
Agnostic
And in your view, US equities priced in unlimited fiat are somehow...not fixed?

Nothing's perfect but like I keep saying, to view the coming 50 years equivalently as the last 50 years is a pretty 'normie' mentality. Something your Schwab broker would tell you to keep you from cashing out your high risk tech equities and getting into land, gold, cash, and consumer non-discretionary staples.

The system itself is collapsing and there are now near constant signs of this. The 'unlimited' debt buying programs recently announced by the ECB is one recent example.

That's a different market with a different set of scams controlling it but this thread is about gold.
 

Cynllo

Kingfisher
Other Christian

Worth considering when stacking grams.

US Department of Commerce Census Bureau asked major holster manufacturers/providers for order numbers, product descriptions, and locations where the items were shipped.

Seems these requests were sent to an unusual number of holster companies
 
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