At about 10pm Pacific time, some favorable leaked austerity numbers drove up PM prices on low volume as the Eur/USD ratio increased correspondingly. It will be interesting to see if it holds. Jim
IMO, it was first the currency change ( stronger Euro vs. USD, then the Euro weakened in their market, but PM seemed to be holding the level for the time being. Not sure as to why that is happening, but it is encouraging for PM.
http://finance.yahoo.com/q/bc?s=GLD+Basic+Chart&t=2y Using GLD as a proxy for gold, the two year chart shows a classic cup and handle pattern forming, and if the price now goes above the recent high, it's off to the races. I've been watching this for awhile.
Or it doesn't. I know you have stated the long term bull market is still in place, and with GLD up 13% YTD I would tend to agree. Now, I am way too stupid to call a top, and maybe QE3 or other factors keep it going a bit more, and it was a great run, but at current levels, I feel the prudent play would be to take profits with a smile instead of hoping to squeeze the last bit out of the run. I would rotate the money into REITS Your thoughts?
mikem2000, the question in my mind is why are we in a commodities bull market? It is because of negative real interest rates. This is more true now than ever. Until interest is raised higher than inflation, which is not likely to happen for 2-3 years at the earliest, if ever, hard assets will continue going up in price. I doubt real estate will drop any further now since with QE3 the Fed is buying up all MBS that the free market doesn't want, but I don't see housing outpacing inflation until the jobs come back. Sure RE is an asset, but you can't just buy a small portion of a house. You have to be financially stable enough to be in it for the term of the loan which requires jobs. The jobs aren't coming back until we have deflation (contrary to what the inflationeers will tell you) because then savers will be able to afford to buy more goods and services with a more powerful currency (good for jobs), and will also have more spending cash (good for home purchases -> demand -> price++). However, since deflation would initially drive home prices down before allowing time for the free market to find its legs the transition period would put the mortgage holding institutions underwater as their net worth would tumble due to their current holdings. RE recently got a shot in the arm with government programs, but all that did was temporarily entice in a new wave of flippers with enough cash to buy a home outright. However, as for existing homeowners upgrading to a better home which is the life blood of that market, those purchases are at historical lows. Money printing will have to continue to prop up these banks until the economy can eventually sustain higher interest rates (banks surviving from real profits instead of ZIRP skimming) otherwise they will take the derivatives market down with them which is essentially the inevitable reset button they are trying to avoid, but in order for the economy to handle higher interest rates we need a fair playing field so the little guys can compete and survive, and encourage job growth. Since this would require taking away the punchbowl from the big 5 it's a catch 22, and only achievable goal is to push the reset button as far down the road as possible. They won't crash the party until the police show up or they drink too much and hyperinflate.
Gold can't be analyzed like common stock, and the only relevant fundamental [in my opinion] is the cost of production. Now that the price is higher than that, I will use technical analysis to determine when the top is in the past. When gold shot up to its high, I sold some because of the mechanical portfolio management system I use, and posted the fact on cointalk, but I still have most of my holdings. I like the reit concept a lot and have owned them in the past, but most of them seem too financially weak now to be interersting.
I disagree. Annual Gold production is slightly above 1% of the world's reserves. Therefore its impact on prices is very limited, unlike more industrial metals. Keep in mind most Gold is produced for less than $700/toz.
What you say is true. I don't know what you disagree with. Production costs are a fundamental, even if a weak one. My point is that there really isn't anything else to measure.
I'd say it is the weakest of them all. What about changes in Central Bank reserves? Value of the Dollar if Gold is mesured in USD? Jewelry and Industrial demand? Bullion demand? Fear of inflation or default of a currency? That's all I can think of for now.
Central bank actions aren't fundamentals. They usually sell to each other. Jewelry and industrial and bullion demand tell you nothing about the long term value, only short term trends. Fear is an emotion, not an investment fundamental. Like it or not, cost of production is the only true fundamental/constant against which value can be measured. Over the long run, gold and all commodities eventually return to something close to the cost of production. Think about it. In the case of gold, the price can vary from cost of production for a long time due to the short term factors you mention, but eventually the fundamental of cost will overcome.
