Beginning of the Week Market Commentary from Gary
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Anyone who bashes gold on this site will get a visit from my friend Luca. He may convince you to change your mind.
Gold is yellow crap – bring all the friends you want.
Thanks Irwin. That article is helpful and it is always good to look back and reflect on the Total Return Index by Jeremy Siegel just to remind ourselves how poorly gold has performed over the very long run. For anyone who never saw this famous chart, here is the link:
Jeremy Seigel’s Total Real Return Index, Stocks, Bonds, Gold and Cash.
http://www.marketfolly.com/2009/01/total-real-return-indexes-1802-2001.html
Hmmm, I think a person with 3000 ounces of gold will never be poor.
Probably not bb. I just liked the chart. It is a helpful reminder for me and I had not seen it in some years.
I have a feeling that Seagal is full of it. I think his maths is faulty. He is sayibng that gold was over $1200 an ounce in 1801. That is pure BS. A $10 US Eagle coin had nearly half an ounce of gold so gold was $20/oz approx. So his total retuen must be denominated in gold. That makes the stock market on his chart up by a factor of 100 million in US dollar terms. I replied to the post on that forum as follows:
I think this post is total nonsense. The total return on gold is +zero% (well, -2% but close enough) so that must mean that the units of measurement are gold and not fiat dollars.
The poster is making the basic error I think of measuring gold in terms of gold and charting stocks in terms of depreciating dollars.
Then you have the Dow. OK on this chart stocks are up 600 times since the inception of the Dow in 1896 from about $1000 value to $600,000. Did the Dow start around 30? Maybe it did, actually it peaked at 381 I think in 1929 and fell 87% to around 41. So Dow returns have been huge because it is now at 18,000. So the Dow graph is being measured in US dollars. In that case gold should be up from $20.67 in the early 1900s to $1920 in 2011, which is 93 fold. Right now at $1200/oz, that return would be 58x.
however, the whole concept of this chart is asinine propaganda.
Those people who found a bunch of gold $20 pieces in a can in their land in California last year might get $100,000 for some of those coins or more.
More onthe Dow compared to gold. HIs chart is nothing like the Dow:Gold ratio chart:
http://www.sharelynx.com/chartstemp/DowGoldRatio.php
(where this particular chart originated).
Overall the Dow:Gold ratio has gone from around 0.3 to 20, call it a hundredfold to be generous, (not a millionfold!) One should expect stocks to outperform because technology and productivity improve and we are not (yet) reverting to the Dark Ages. Since this is the Dow price and not toal return one needs to ask how much extra return is there from dividends and I have heard analyses that say 40% of the annual return on stocks comes from dividends (I heard Jim Puplava say that on a podcast this weekend). Therefore being very generous you could double the performance of the Dow price for a total return measurement which would give you 200x outperformance of Dow vs gold over 200 years. However of course, the whole thing is meaningless because it is not like for like. Also the majority of the outperformance of stocks to gold was in the first 150 years and since then we had a gigantic megaphone pattern of wild swings in the Dow: Gold ratio.
Marketfolly.com yeah, folly indeed … totally asinine if you ask me, which you didn’t!
More about coins:
Those people who found a bunch of gold $20 pieces in a can in their land in California last year might get $100,000 for some of those coins or more. They might fetch an average over $3000 each but some are rare dates.
Here one could compare like for like. This guy is basically saying if you took some gold in 1800, let’s say the early 1800s you night have had gold $10 pieces as a nice coin to hoard.
Looking at Heritage Auctions webite, this coin
1804 $10 Crosslet 4 MS61 NGC. Breen-6847, (in low mint state)
fetched $69,000. Return is 6,900x therefore.
Let’s take the year 1800:
1800 $10 AU58 PCGS. This went for $22,000,, a 2,200x return
and this is LIKE FOR LIKE. The actual thing put into a tin can in 1800 worth $10 is now worth $22,000.
This Seagal chart above is pure BS.
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I am certainly not bashing gold in the conventional sense by the way. I simply think that it will stay at these levels for awhile.
Taking into account what is going on in Europe and euro, it is difficult to beleive that euro will start going up against the USD in the next few days.
I think it is more worries about Germany heading towards deflation rather than the threat of Greece leaving.
Or the next few weeks!
Al, all ABOARD!! on the gold stocks ๐
What is the rule for tax lost selling in the US, how long before you can buy back in?
Does the next few weeks tie into that senario ๐
Peter
Peter:
Not Al but I believe that one must wait 30 days after a tax loss sale to buy back the same equity otherwise it is considered a “Wash Sale” and the loss deduction is disallowed.
I’ve been told by my accountant that up to $3000 of ordinary income can be offset annually against Capital losses.
Thank you Dai Uy
Peter
Oil should bounce from 50 by at least $3 or $4 before it continues down. My holdings are luckily slightly positive today as they have already had corrections.
Don’t bet on this happening Paul.
Can’t see oil bouncing – it is in freefall. Would take a brave person with deep pockets to take a position now IMPO.
I would not take any positions in oil stocks yet but a bounce would help the general market and you could lighten up on a rally.
No worries Al :),
Update: I said last week that by friday Jan 9th we would see high 40’s.. Im off by a day or two :
Everything is going to plan and very few are on board. This includes Gary and others.
Matt did you see the break on iamgold at 3.30 i discussed yesterday lol? Clear breakout. Many are still in denial and these miners are stair stepping up. Seasonality favors gold here and i truly feel bad for the one’s not on board.
I got my 119 euro that i wanted=check
Could go down to 115/118 but 118/119 fits the appetite
Loonie as expected by glen on its way to 83 and quite possibly but unlikely 77/80 which I called for as well.
Dollar topping pattern and sideways as equities to continue to sell of hard. Im expecting the black swan to be Draghi stating they will launch money printing. My dates for that are anytime now as I type and possibly end of month.
Gold and silver higher.
Lets wait and see if the dollar breaks out. This little pullback it is doing now looks like it is threatening to blast off.
Congrats Glen, I’m not surprised by IAG’s action. It is now outside the Bollinger bands and poking through the top of the Keltner channel. It would be good if it can take back the May lows in US$ at around $3. It’s now at $2.97 U.S. Avoid like the plague!!! lol, jk.
Sorry…..What does jk mean?
JK = Just Kidding
Thanks Brian.
Matt,
Thank you it’s been a good while to get here. Everything looks good and the end of the session today seems like a set up for tomorrow. Im still waiting for a big upday in hui. A big 30/40 pop. Lets see how it plays out.
ALL ABOARD ๐
Peter
Glenfidish
ALL ABOARD ๐ Gold stock train ๐
hmmmm isn’t that train derailed?
I meant high 40’s on wti.
Gary,
Dollar is way overbought on the weekly..Gold signaling breakout.
I don’t think so. Look at the hourly. It cannot even break above 1205. Lets say I have my doubts.
And sure enough, there we go, gold is headed back down before taking out 1205. Maybe hold off on the optimism just a little longer. The fat lady did not sing yet.
Oh ye of little faith Bird, 2 minutes to market close and gold is at 1206 and change.
I kinda think Mr Moriarity and Mr Fulp are gonna be right for the next little while.
Buying around mid dec and selling somewhere in the first 3 months of the new year has been profitable for 11 out of 12 of the last few years, something about Holiday doldrums?
I believe both advise to take profits.
On the other hand, we could have a complete and total collapse of the US dollar at any moment and gold goes to kwn numbers. lol
Think Ill take profit if I find em.
Thanks bb….11 out of 12 years you say? Hmmm, that is an encouraging statistic. Wonder if it holds true this year.
It seems reasonable to have your doubts bird more so after a long three plus year bear market in gold. I caution though as many will be left behind if this market had indeed turned like i presume. The recipe and writing is on the wall bird. Wti at record lows and crb at record lows is the recipe to launch metals and miners.
I won’t rule anything out. Like you I am watching the charts and playing it by ear day to day. But you are correct, after such a long decline there are lingering doubts that each new rise is just another trap. i don’t know many who are making any calls with absolute certainty yet. The PM markets have made fools of more smart investors than just about any other.
+1 glenfidish
Just be sure to take profits sometime in the next month or two. Gold still has a date with a lower low and the odds are still very high that this is just another bear market rally.
Profits? What are those things?
Gary
A month or two?
Is that the best you can do.
Why not wait until the chart tells you to get out, why just talk for the sake of talking, it make no sense. Let the maket tell you when to get out.
Peter
Gold is looking very strong in GBP and EUR, compared to USD. You can follow real-time prices and charts at http://gld.pm and http://slv.pm. Ideal for your mobile device.
LOL. Folks, deflation is among us all, especially in the U.S.
Then print print print. If it cannot stop inflation, it at least can make us rich.
Deflation I mean.
Oil is telling you the game is over…
It is not good news. It is telling you that liquidity is gone. QE created the bubble and now it’s over.
I think Armstrong and others are gonna get their heads handed ot them by assuming we’ll get to Oct 2015.
I think the big money is gonna crush him to prove who is the boss.
One must remember worldwide how much tax revenue comes from oil. These economies are collapsing and the markets are showing this.
It is to soon to make this assertion. Wait till high cost production shut off. Oil is a valuable commodity. Low oil will help US rivals like China greatly. I doubt this is allowed to continue unless Wall Street has lost control, which appears not yet. When financial system collapse, hard asset are the best refuge.
Wall Street never loses. They probably got the heads up to short oil. I do believe though that some were not given this helpful tidbit…..wink, wink, CITI, wink….
We know that oil stocks suddenly took off last year. I don’t know the reason.
At present, it looks like stops have been triggered.
I believe a lot of QE money went into oil, thus inflating the price. Now that there is no more QE, oil if going to find its true value.
There are a lot of oil but not under this price. Drilling rig count is dropping like crazy. Due to steep decline curve of horizontal drilling, we can expect the supply to drop within a few months.
Lawrence, most countries are circling the toilet bowl, and oil is telling us that now. Oil with have to go a lot lower to reflect the true state of the world economy. What that price is I don’t know, but I wouldn’t be surprises if we see oil under $30 this year. I believe this is the year that the wheels finally come off the party bus. Remember, this is a shemitah year.
I agree if we are on gold standard. We should always remember that there are many printing presses. They can alway print more money and even hand over to the masses after all. Bush used to do it. Howver, if we are on gold standard, we would not have gone this far in madness.
2 things are going to stay low.
INTEREST RATES and OIL …………….
Peter
ALL ABOARD
Gold miners leaving the train station ๐
The three muskateers can stand there and watch the train leave ๐
Peter
Hey AL
Either you guys have no technical knowledge, or you have very strong personal feelings on the gold miners. I tend to rely on my technical knowledge not my feeling.
The miners are heading higher!
Peter
How come I did not hear about the bearishness when oil was in the 90s a few months ago? Are people responding to price only or fundamental? Fundamental does not change in a short period of time.
Just an observation.
Absolutely true. When price declines, bearishness will increase. Many of the major oil players study all of these supply/demand curves and have a very good understanding of future demand. What controls the price? Supply / demand or other factors, lets say interest rates, currencies, derivatives? Did everybody trading oil overlook the fact about supply? I highly doubt it. Now a $7 contango is building between Feb and Dec oil. If oil drops much more, I expect this to increase to $10 / $12 prior to it stabilizing.
Thanks. Richard. It happened in 2008 also, huge contango. This means that a lot of crude comes to the market now but future sales are tight. It may mean high price later if contango continues.
Also I heard that Chinese gold premium is at $7-9 compared to London price.
The rally in gold from 1205 on 30th december 2013 to 1382 on the 14th of March 2014 and gdxj from 30.1 to 44.83 on the same dates, did so slowly. A day or two up and a day down. The 3 muskateers appear to want to see a HH to da moon swing to be convinced that the miners and gold can stage any kind of rally.My conclusion from the daniel code and gold tent (great site Glen, thanks) is that gold and the miners should rally for now.
GDXJ is performing better this year and is already up 22% from its 12/16 low. I agree that the miners should rally. The important weekly is looking better every day.
Gary
How can you say the gold stocks aren’t going anywhere. did you not see what they did last Friday, up big time, but that does not count.
BIG AL don’t bash gold to hard Kitco is a client of yours and they sell physical gold, they might cut you off ๐
Peter