Otter

So its pretty clear that Nadler is a long-term bear on GOLD and thinks we are somewhere in the middle of a bubble. His logic is hard to challenge.

I just wonder why an analyst a company that makes money selling precious metals would be such an outspoken person against GOLD. Seems like he would be turning people away from buying.....but maybe Kitco is want to accumulate more for later (gotta love the conspiracy twist).

But seriously, in this day and age when most analysts hock whatever they are selling, is he an 'honest analyst'?

Cloudsweeper99

Nadler has been telling folks to stay out of gold for some time now. Makes you wonder... His logic is easy to challenge. He's been dead wrong.

Morgan1878

There are any number of "big time" analysts who got their reputations making a timely call or two and proceed to create a litany of mediocre market predictions. Kinda like "one-hit wonders".

Money managers who have decades long consistent performance records, are in my opinion a more creditable source of information. Jean-Marie Eveillard of First Eagle Funds (First Eagle Gold, First Eagle Overseas,etc) and Bill Gross of PIMCO are two that immediately come to mind. Both of these gentlemen have a lot of "skin in the game" meaning that they have meaningful amounts of their own money in the investments they
help manage.

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elaine 1970

simply he doesn't have any gold. kitco should have fire him.

Otter

Are you questioning his fundamental supply/demand proposition or something else? I don't have access to the data (or at least don't know where it is), but if his data is correct, there seems to be more supply than demand, with speculators driving up the price. According to Kitco's new index, not a lot of the price increases are tied to the drop in the dollar. So with more supply than demand and the dollar's drop not explaining all of the increase, I'd really like to know where the increase is going to come from. I haven't added to any positions (each day I friggin watch it go up $20..argh), but I also haven't liquidated any positions....

What am I missing???

JoeSmith

I read him almost daily. I think he's being honest. Kitco isn't like the companies with the radio commercials who always tout gold. He's not a gold bug. He hasn't adjusted his thinking to the current financial situation, which is what is driving gold. I wonder if he can comprehend the size of the numbers we're talking about. He thinks that when the bubble bursts, he'll be able to say "see, I told you so". He thinks the bubble has to burst eventually, because he can't picture the dollar becoming worthless.

In today's column, "Hyperinflation. Of Sentiment", he says:
"People will see, and bet on, what they expect to see, what they want to see, or even what they are told they are seeing, as often as they will see, and bet on, what they are actually seeing. In this instance it is remarkable the number of people who are "seeing" hyperinflation down the road where none is, so far, apparent."

He's right that people see what they expect to see. People expect to see the dollar have some value, when in fact it's all in their heads. Dollars don't exist, they're just numbers.

Morgan1878

George Soros coined a term called reflexivity. It simply means that we base today's investment decision on what happened yesterday and tomorrow's investment decision based on what happened today. Because there can be so many factors that affect investments, people use reflexivity as a way to establish a psychological foundation so they can move ahead with decision making.

Gold has had only one losing session this month. As the price moves relentlessly up, it exerts a pull on those investors who are on the "outside looking in."
As these investors become more anxious, their uncertainty that the gold train is leaving the station will cause some of them to hastily climb aboard.

While Mr. Nadler may talk about how the market should work with his stats of supply and demand, reflexivity describes how the market does works since it describes how people actually behave.

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Morgan1878

Eventually there will be a gold bubble and it will burst, but time is not yet full for that to happen.

I don't believe the dollar will become worthless and I don't think we will have hyper-inflation but as long as these uncertainties continue to drive the price up of gold up, I will stay in the game. Uncertainty creates value. Because uncertainty is an emotion, you can't say whether or not gold is too expensive.
It's price is being driven by fear and greed, not fundamentals like supply, demand, production and all of that.

To paraphrase Benjamin Graham: "The valuations seem high." The valuations are high. The valuations are as high as they seem..."

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hillbillyricky

the time to buy gold was several years ago when I could buy double eagles for $300, sure you might ride gold up another 100-200 bucks but the easy money has already been made in gold, buying now is risky . keep in mind when gold sell off it takes the elevator for a quick drop!! I to won't take a nice orderly decline.

Cloudsweeper99

The first problem I see is the notion that supply is greater than [or less than] demand. Supply is always equal to demand in the gold market. I know the World Gold Council and other groups gather statistics, but I doubt their accuracy. The instant their numbers show a supply/demand imbalance, they are suspect. It also assumes that only new production plus sales from existing inventories is part of supply, when the reality is that all gold inventories are part of supply -- at some price. And to say speculators are driving up the price is really an admission that investment demand is soaring. Maybe this is the piece he is missing. How does he know they are "speculators?" Can he read their minds and motives? Nadler doesn't seem to understand the basics of a market he studies daily. The folks who read his analysis and follow his advice have missed one of the largest moves in the history of gold. What does that tell you?

JoeSmith

I hope you're right. Could you give us a reason for your optimism? I need a reason to feel better about the economy.

When you look for the best bargain, and you think you've found it, its time to think about it. Why is he selling this car so cheap? Maybe its because he needs cash real quick, or maybe its because there's something wrong with it that you're not aware of.

What Nadler, and other analyst are seeing is plenty of supply, little demand, yet gold just keeps going up. That means someone is buying, India is buying, at these inflated prices. Why?

What gold bugs like me see is people are selling their dollars, cashing them in for gold. Sounds like people are afraid of what might happen to the dollar. Everyone is in debt, the US is printing dollars like never before to bail out everyone who is in debt, we aren't producing things of value. Is that a recipe of hyperinflation? If not, why not? Isn't that how hyperinflation always happens?

I hope I'm wrong.

Otter

Maybe because the futures market is driving up the price and not actual demand for physical gold?

MasterBlaster

IMO Kitco is naked short on their "pool" accounts...what would happen if PM's had a moon shot and there was a rush to convert to physical metal? They run a Ponzi system like the COMEX, Perth Mint, LBM, SLV...Nadler talks down owning gold, has been since 2004. Why would a company hire a "Chief Analyst" that is negative it's own product? When silver jumped to $20 last year Kitco pool customers who wanted to convert unallocated silver to 1 or 10 oz bars were quoted, when the web site worked or phones answered, exorbitant fees and long wait times... "If you don't hold it, you don't own it"...Ponce

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Morgan1878

My main reason for optimism is that the health of the global economy is an inter-related process. All of the G20 countries know this and they are working to eliminate the excesses that cause financial crises. They have at their disposal communication and analytical tools that were non-existent during past economic crises. Although not perfect, there is a willingness among the world's 20 most important economies to find solutions in spite of each countries different economic objectives. A common objective for all G-20 countries is political stability...no waving of pitchforks in the street please!

A lot of the stimulus money (a huge number 700+ billion) that was printed is sitting in banks, not in circulation. Unless lending standards are eased and/or banks are willing to take more risks, that money isn't in play. And that won't happen. The old model of borrowing cheap and leveraging it to take you to treasure island is gone for our lifetime.

There is however the "dollar carry trade" that is causing problems for emerging market economies by virtue of the vast amounts of dollars looking for higher yielding investments that exist outside of the U.S. This is a by-product of our low interest rates. The problem for these emerging economies is that their currencies go up making their exports more expensive especially relative to China whose currency is pegged to the dollar.

As you may be aware, the dollar carry trade works like this: As an example, you borrow dollars at a very low interest rate, sell the dollars to buy Australian dollars and invest the Australian dollars in Australian government treasury bonds that yield 3%. If this trade works perfectly, the U.S. dollar will depreciate, the Australian dollar will appreciate and you will pay back your depreciated dollar loan with a higher value Aussie dollar making 3% plus any profit you might clear on the currency trade. Since this type of scenario has been repeated jillions of times recently, it is a big reason why the dollar has depreciated due to the large amount of dollars that have been sold to buy other currencies. You can get screwed on this type of trade when you bet the wrong way. Today, the Dubai debt crisis sent the dollar up which means that you might be paying back a stronger dollar with a currency that lost value after you bought it, possibly losing money on your trade.

As far as inflation, you need inflation at a reasonable rate to grow any economy. Businesses need to be able to raise prices in a responsible way so they can expand. Expansion implies hiring more employees, accelerating inventory build-up, etc. When the fed thinks that this process is catching fire and has enough heat, it will start to raise rates. Look to around early 2012 for this.

Actually, the fed is more concerned with the possibility of deflation a la Japan and its "lost decade". Why? Because the Fed has fought inflation many times before and globally there have been enough historical inflation events to provide a blueprint to combat it. Deflation, however is a different story. Deflation as you are aware, is a situation in which prices continue to head lower and with it economic activity. If not stopped, it spirals out of control with ever increasing layoffs, businesses shutting down, etc. Too much of this and you've got social disorder which governments loathe. The Fed will do anything, including negative interest rates to avoid deflation.

So where does that leave us? The Fed says that it can pull the extra stimulus cash out of the system before it causes runaway inflation. The world says "O.K." but I'll buy some gold as insurance in case it doesn't work the way you planned it. The world is also buying gold because of the effects of the "dollar carry trade" which causes inflation in emerging economies.

As long as the global economy has these concerns regarding the outcome of liberal central bank policies (U.S. and Europe), gold will continue its path upwards.

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Cloudsweeper99

That's an excellent possibility to consider. I hadn't thought of it that way but it makes sense. Unfortunately, it can't be verified. One thing I would say is that Comex is not a ponzi scheme. It is possibly the only honest custodian in the world with numbered and insured bars for every certificate holder. And holders can take possession of the numbered bars any time.