Gold

[Condors]

So today was noteworthy with gold cracking all time highs.

While some economists argue that quantitative easing will cause galloping inflation, others like Mish are arguing that deflation is in fact occurring and will continue.

I'm buggered if I know, but gold bugs seem to have made up their mind.

Although there is a pretty reliable seasonal bull at this time of year which could be responsible.

I'm more interested in just trading the moves, but it makes for cracking arguments. 

The chart is weekly continuous gold futures.

[Condors]

Mike Shedlock, who runs a great blog from the Austrian, deflationista point of view at http://http://globaleconomicanalysis.blogspot.com/ has a comrehensive look at gold today and how it fits in with current economics.

The whole post is here Gold And The Watched Pot Theory

I like this quote from Chris Martenson 

During Depression I, I would say it was Frank Roosevelt's 40 percent devaluation of the dollar against gold which finally stopped the deflation. After Wild Ben 'Maggot Brain' Bernanke has cut his policy rate to zero, dollar devaluation is the only policy option left to ease our collective pain.

LMAO

But here is just one of the mains snippets regarding gold in a long and interesting readread. FWIW

Message Of Gold

The reason for the strength in gold is not US inflation. As I have pointed out many times, gold fell from 850 to 250 over the course of 20 years, with inflation every step of the way. Thus, the inflation story just does not fit.

However, it should be clear that a major financial crisis is in store following a long period of competitive currency devaluation and massive debt and derivatives expansion by nearly every major country on the planet.

The G-7 agreed to do nothing to fix this mess, nor did the previous G-20 meeting. Countries are going to do what they are going to do: follow misguided Keynesian logic that suggests one can spend one's way to prosperity even though the problem is excessive spending across the board.

Might the US dollar blow up? Yes it might. But so could the RMB if China floated it, and so could the British pound. No one seems to see the crisis brewing in Japan with a huge demographic problem, a shrinking population, falling exports, and no way to pay back its national debt.

There is seldom a mention of the problems in European banks who foolishly lent money to the Baltic States in Euros or Swiss Francs and now those Baltic country currencies have collapsed and the loans cannot be paid back. European banks also lent to Latin America and those loans are also suspect. Arguably, European banks are in worse shape than US banks, but no one talks about it, at least in the US.

Spain has unemployment approaching 20% yet must suffer through the same interest rate policy as Germany. Seldom does one hear about this either.

Certainly the UK is a complete basket case with its banks on government life support. Iceland has already blown up, who is next?

Most are not aware of the problems in China, Japan, or Europe. However, the problems in the US are universally well understood. Indeed all eyes are on the dollar and everyone is talking about deficits, monetary printing, and especially unfunded liabilities even though the latter is tomorrow's problem, not today's.

Watched Pot Theory Revisited

A watched pot may boil, but it's not likely to explode, especially when everyone watching the pot expects an explosion any second.

Indeed, it would be fitting if the Ridiculous Hype Over Secret Oil Meetings, helped form a bottom on the US dollar.

Yet, it's easy to see that a financial crisis is brewing.

Somewhere, something is going to blow sky high, but from where I sit, it's as likely to be in the Yen, the Swiss Franc, the British Pound, or something no one is watching at all as opposed to the US dollar specifically.

Mike "Mish" Shedlock

[Condors]

Jim Rogers has made another one of his public pronouncements.  This time it's Gold to $2000... but he's not a buyer?

http://finance.yahoo.com/tech-ticker/article/352044/Jim-Rogers-%22Quite-Sure%22-Gold-Will-Hit-2000-Dollar-Will-Lose-Reserve-Status?tickers=GLD

Jim Rogers "Quite Sure" Gold Will Hit $2000, Dollar Will Lose Reserve Status

Posted Oct 12, 2009 09:00am EDT by Aaron Task

Famed investor Jim Rogers is "quite sure gold will go over $2000 per ounce during this bull market."
Rogers' confidence gold will continue to rally stems from a view the U.S. dollar is on its way to losing status as the world's reserve currency.

"Is it going to happen? Yes," Rogers says. "I don't like saying it [and] I'm extremely worried about it but we have to deal with the facts. America is not getting better [and] the dollar is going to be replaced just like pound sterling [was]."

Rogers didn't offer a timetable, and it's likely gold would exceed $2000 per ounce if the dollar were to lose its reserve status.

Still, "I wouldn't buy gold today," Rogers says. "I think I'll make more money in other commodities, which are cheaper," as discussed in more detail here.

Among many others, Rogers is "worried about the fact the U.S. government is printing huge amounts, spending gigantic amounts of money it doesn't have," the investor and author says. "People are very worried [and] skeptical about paper money [and] looking for places to protect themselves. The best way is to buy real assets. [That] has always protected one during currency turmoil, and it will again."

[Condors]

Here is an interesting perspective from Jared at Condor Options regarding the relationship between the USD tankage and Gold, via their Implied Volatilities.

http://www.condoroptions.com/index.php/featured/volatility-tracker-no-runaway-reflation/

Traders have become increasingly focused on the role that the dollar is playing in exacerbating rallies in equities, gold, and other assets, with concern in some quarters about a more precipitous dollar decline to come. At least on the implied volatility front, there’s no sign of such worries yet. EVZ, the index that tracks VIX-style implied volatility for FXE (a EUR/USD ETF) is pushing to new all-time lows. Note that sudden price spikes in recent history correlated with moves higher in implied volatility; however, the relentless trend of summer and fall 2009 has not seen any corresponding increase in implied volatility. I regard this as confidence among traders that there is little concern of a dramatic rise in EUR/USD, even if the current trend does continue.

When gold closed above $1000 some weeks ago, that move was accompanied by a significant rise in implied volatility.[3] However, the break above $1050 in recent sessions has not seen a similar confirmation – not of the same magnitude, anyway – in implied volatility, which may be a contrarian signal that traders are not concerned about a runaway gold rally. Gold certainly looks overbought on a price basis.

...and the current $EVZ chart:

[Condors]

I posted this in the Economics section, http://www.internationalstockforums.com/index.php/topic,23.0.html but has implications for gold.

So for the benefit of Gold bugs:



Preparing Americans for Hyperinflation

[Condors]

Here's an interesting chart I found on another forum. Self explanatory really.

[Condors]

This from an article I posted in the economics forum, but some interesting comments from Nouriel Roubini regarding gold:

Roubini: I don’t believe in gold. Gold can go up for only two reasons. [One is] inflation, and we are in a world where there are massive amounts of deflation because of a glut of capacity, and demand is weak, and there’s slack in the labor markets with unemployment peeking above 10 percent in all the advanced economies. So there’s no inflation, and there’s not going to be for the time being.

The only other case in which gold can go higher with deflation is if you have Armageddon, if you have another depression. But we’ve avoided that tail risk as well. So all the gold bugs who say gold is going to go to $1,500, $2,000, they’re just speaking nonsense. Without inflation, or without a depression, there’s nowhere for gold to go. Yeah, it can go above $1,000, but it can’t move up 20-30 percent unless we end up in a world of inflation or another depression. I don’t see either of those being likely for the time being. Maybe three or four years from now, yes. But not anytime soon.

[Condors]

There's been a pretty good looking bounce in gold from the previous resistance line (becoming support), which also happens to be the same point of the uptrend line I posted here http://www.internationalstockforums.com/index.php/topic,5.msg96.html#msg96 in The Gold options thread.

It looks a pretty damned good swing trade signal. 

Paul Tudor has gone all gold-buggish as well.

[Condors]

There's been a pretty good looking bounce in gold from the previous resistance line (becoming support), which also happens to be the same point of the uptrend line I posted here http://www.internationalstockforums.com/index.php/topic,5.msg96.html#msg96 in The Gold options thread.

It looks a pretty damned good swing trade signal. 

Paul Tudor has gone all gold-buggish as well.

Just an update with a chart added. A better looking technical swing-trade entry you will not see. Whether gold goes on, or how far it goes is a completely different question.

Plotted here with $GVZ (the VIX of gold options)