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Ardent Listener
Administrator
USA
4841 Posts |
 Posted - 12/08/2009 : 08:57:02
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Stock Market and Gold Crash, Are We About to Repeat 2008?
Stock-Markets / Financial Crash
Dec 07, 2009 - 09:34 PM
By: Graham_Summers
A few weeks ago on November 10, I wrote an article Three Reasons Gold Might be Making a Head Fake.
In it, I noted that Gold’s recent rally was largely due to Dollar devaluation (Gold had failed to hit new highs in other world currencies) as well as several other factors that disconfirmed the precious metal’s explosive rise. I wrote:
Unless we start seeing confirmations of Gold’s breakout coming from other precious metals or gold mining stocks, then we could very well see Gold stage a massive reversal in the near-term. A Dollar rally (which I believe may be starting) would certainly hit Gold hard since most of the precious metal’s gains have come based on Dollar devaluation (see Reason #1 above).
Last week, Gold proved my point staging a sharp reversal falling 6% in two days’ time. Those caught on the wrong side of this trade got absolutely obliterated.
The reason for the reversal? A sudden, and sharp US Dollar rally (which I also predicted on November 11). Indeed, last week the “short the Dollar, go long everything else” crowd got hammered when the Dollar rallied more than 2% in a little less than 48 hours.
The question now is whether last week’s carnage was a mere blip in the continued Gold rally/ Dollar drop or if this is indeed the start of something more significant. To determine this, we’ll take a look at the bigger picture for both assets.
Since Gold’s rally is hinging on continued Dollar weakness, we’ll start with the Dollar first. Below is one year chart for the US currency:
As you can see, the Dollar has been in a steep downtrend since March 2009 when the Federal Reserve announced its Quantitative Easing program. Since then, we’ve seen multiple rallies to the 50-day moving average, but NO real test of that level until last week.
Taking a closer look at last week’s action, we see that the Dollar has staged its first real breach of its 50-day moving average. This is MAJOR as it is the first time the Dollar has achieved anything resembling REAL strength from a technical analysis standpoint in well over nine months.
Indeed, when we draw in the trend line for the Dollar, we see that we ALSO got a clear break of its downtrend. This development is also MAJOR since the trend-line has served as a point of resistance no less than nine times since May. To see the Dollar break above it AND the 50-day moving average is a strong indicator that this is no mere head-fake and may well in fact be the start of a serious trend reversal.
This is absolutely critical because it was a Dollar rally that CRUSHED stocks and commodities last year. Indeed, the first major warning sign of the October-November nightmare was the Dollar catching a bid, a process that began a massive short-covering in the US currency (the entire world was borrowing in Dollar or Yen at the time) which kicked Oil (black) and stocks (blue) in the teeth as more and more investors piled into the greenback on an increased flight to safety (see below).
I call it Financial Crisis “Round Two” Survival Kit. Not only can these investments help protect your portfolio from the coming carnage.. they can ALSO show you enormous profits: they returned 12%, 42%, and 153% last time stocks collapsed.
Swing by You must be logged in to see this link. to pick up a FREE copy today!
Good Investing!
Graham Summers
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Think positive. |
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Country
1000+ Penny Miser Member
USA
3121 Posts |
 Posted - 12/08/2009 : 12:44:58
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Not a chance! 2008 was a once in a century event. Sovereign governments will print fiat until the ink runs dry to avoid another 2008.
While the $USD could have a rally, I believe its rebound is just a bounce from oversold levels. A few days of outperformance does not imply a "fundamental" long term trend change. Further, it is now December; a time when investment managers are locking in their profits and "bonuses" for the year. It has been a good year and there are good profits for those who made the switch to a BULL market around the March 2009 timeframe.
The GOLD rally is more than $USD weakness. It has been a reallocation of portfolio money and sovereign financial resources into something other than fiat currencies. There have been many days in this GOLD reallocation event whereby GOLD went UP when the $USD went UP. BUYers of GOLD seek the safety of their BUYing power and will continue to do so regardless of how fiat currencies perform.
January 2010 will give us all insight into the investment trends for next year. |
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The things that will destroy America are prosperity-at-any-price, peace-at-any-price, safety-first instead of duty-first, the love of soft living, and the get-rich-quick theory of life.
– Theodore Roosevelt
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Lemon Thrower
1000+ Penny Miser Member
USA
1588 Posts |
Posted - 12/08/2009 : 13:34:17
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gold will not go up in a straigh line.
its overdue for a pullback. whether that is for reasons related to 2008 or for other reasons is debatable but really unimportant.
things usually go down a lot faster than they go up. so let it go down, wait for it to go back up. you might miss the absolute bottom but you'll get most of the trend.
also, a wiser person than me has said there are no markets any more, only manipulations. so there is a limit to what you can predict by studying the market. for example, why did gold decline when the dollar crashed last year? textbooks say is should rise. ahh, but the readily available experts will explain this after the fact as hedge fund liquidation. There are countless examples of things that don't behave the way they are expected to, and then reasons for this manufactured after the fact.
as for getting obliterated with the move down, only those who were leveraged got obliterated. i measure my wealth in ounces, not dollars. |
Buying:
Peace/Morgan G+ at $15.00
copper cents at 1.3X
wheat pennies at 3X
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brian0918
Penny Collector Member
USA
315 Posts |
Posted - 12/08/2009 : 14:13:42
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quote:
Originally posted by Lemon Thrower
i measure my wealth in ounces, not dollars.
Unfortunately, the rest of the country trades in dollars. So hopefully a huge spike in gold prices doesn't result in an inability to sell gold. |
"The man who speaks to you of sacrifice, speaks of slaves and masters. And intends to be the master." -- Ayn Rand
Searched: $2230 Nickels; Liberty: 1; Buffalo: 4; War: 20; 2009: 2; 2010D: 8 |
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jonflyfish
Penny Hoarding Member
USA
693 Posts |
Posted - 12/08/2009 : 16:36:40
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Black swans are real. Anything is possible- repeat, 3x-peat etc.
What I like most is the dogmatic pontifications of Graham Summers puffing his chest out for calling a correction...so early, in fact, that gold is still above the day he called for the sharp correction and yet he boasts-
"...Those caught on the wrong side of this trade got absolutely obliterated..."
Hmpf- I wonder what that meant for those who took his advice on Nov 10 and went all in on the short side... |
The first panacea for a mismanaged nation is inflation of the currency; second is war. Both bring a temporary (and false) prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunities. |
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Lemon Thrower
1000+ Penny Miser Member
USA
1588 Posts |
Posted - 12/08/2009 : 17:01:46
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quote:
Originally posted by brian0918
quote:
Originally posted by Lemon Thrower
i measure my wealth in ounces, not dollars.
Unfortunately, the rest of the country trades in dollars. So hopefully a huge spike in gold prices doesn't result in an inability to sell gold.
a spike in gold price means things cost fewer ounces. |
Buying:
Peace/Morgan G+ at $15.00
copper cents at 1.3X
wheat pennies at 3X
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Tourney64
1000+ Penny Miser Member
USA
1035 Posts |
Posted - 12/09/2009 : 14:47:50
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| If you had $10,000 in US dollars, would you prefer to hold the $ for 2 years or hold 8.87 ounces of gold for 2 years? |
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Nickelless
Administrator
USA
5580 Posts |
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brian0918
Penny Collector Member
USA
315 Posts |
Posted - 12/09/2009 : 19:50:11
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quote:
Originally posted by Lemon Thrower
quote:
Originally posted by brian0918
quote:
Originally posted by Lemon Thrower
i measure my wealth in ounces, not dollars.
Unfortunately, the rest of the country trades in dollars. So hopefully a huge spike in gold prices doesn't result in an inability to sell gold.
a spike in gold price means things cost fewer ounces.
Right, what I'm saying is that gold might spike so much that, even if I buy 1/20oz or 1 gram bars now, nobody will be able to afford buying them from me after the hyperinflation. So I would temporarily be unable to trade with anyone until I could find someone who could afford to buy it from me in exchange for whatever the new currency is. |
"The man who speaks to you of sacrifice, speaks of slaves and masters. And intends to be the master." -- Ayn Rand
Searched: $2230 Nickels; Liberty: 1; Buffalo: 4; War: 20; 2009: 2; 2010D: 8 |
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silverhalide
Penny Sorter Member
92 Posts |
Posted - 12/10/2009 : 09:25:08
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If the market manipulators like Goldman and company think gold prices are in a bubble mode and and trying to force a short term correction upon us they are certainly ignoring the underlying fundamentals of our currency. We have been in a printing mode for a very long time now as the USA has never had a trade surplus since 1976 and the figure is so bad the deficit is more than double of the rest of the debtor nations combined. 12 trillion in national debt that continues to grow with a huge social security and medicare obligation. In addition, we are still near record personal mortgage and credit card debts. If we didn't control the world in military prowess our currency would be worthless by now much like Argentina which was forced to revalue in 2000.
I don't buy the deflation argument other than I agree there are underlying severe pressures in the wage/residential real estate sectors given oversupply but you must realize low wages = severely reduced revenues for the treasury which adds just more problems with servicing the debt.
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Lemon Thrower
1000+ Penny Miser Member
USA
1588 Posts |
Posted - 12/10/2009 : 09:45:37
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quote:
Originally posted by brian0918
quote:
Originally posted by Lemon Thrower
quote:
Originally posted by brian0918
quote:
Originally posted by Lemon Thrower
i measure my wealth in ounces, not dollars.
Unfortunately, the rest of the country trades in dollars. So hopefully a huge spike in gold prices doesn't result in an inability to sell gold.
a spike in gold price means things cost fewer ounces.
Right, what I'm saying is that gold might spike so much that, even if I buy 1/20oz or 1 gram bars now, nobody will be able to afford buying them from me after the hyperinflation. So I would temporarily be unable to trade with anyone until I could find someone who could afford to buy it from me in exchange for whatever the new currency is.
i think there is a flaw in your logic. it sounds like you assume you will have to sell the gold in exchange for FRN's, and then use those FRN's to buy what you wnat. I think you will be able to skip a step.
if today, you buy a 1/10 ounce gold coin, it will cost $150 today. today 3 of them might buy you a good handgun like a glock in trade. if there is a hyperinflation, FRN's will be close to worhtless but glocks won't magically disappear. someone with an extra glock will gladly trade it to you 3/10 oz of gold. they might even except 1/20 ounce of gold. you could trade it for food, land, or anything else you can buy with FRN's today. now, if there is a war, things like guns and food might be worth more than gold, but that is a different story and that's why its a good idea to invest in some preps. |
Buying:
Peace/Morgan G+ at $15.00
copper cents at 1.3X
wheat pennies at 3X
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keys
Penny Collector Member
383 Posts |
Posted - 12/26/2009 : 16:24:20
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Gold is always last resort money. It is accepted when the local fiat is not.
You must be logged in to see this link.
"When the Red Army placed Budapest under a siege those who had gold ate; those who didn't went hungry....During the next hyperinflation, following World War II, dentists refused to take paper money for professional services rendered. My mother paid for dental work needed by my sister in gold." I suspect those who had gold in those terrible times not only could get food & dental work, but also medicines or car repair or gasoline.
We can take a look at the misery of Zimbabwe where a few grams of gold were readily traded for food while those with wheelbarrows filled with Zim dollars found the shelves empty.
Maybe we should think less about gold buying dollars to buy things and more along the lines of gold being the item to barter for food and other items. |
I change with the times-
but like silver coins found in your change
I stay the same.
*****************
The United States of America started out as the new Republic of Rome.
Will The United States of America end up as the New Imperial Rome? |
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wheeler_dealer
Penny Collector Member
USA
402 Posts |
Posted - 12/29/2009 : 21:32:20
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I agree with keys and the others. Most everyone has an understanding of gold. It is just a piece of metal right? than why do we go to GREAT lenght to protect it. If the U.S. $ is not backed by gold then why is the U.S. govt one of the biggest holders of it in the world. If the dollar crashes and becomes unacceptable for day to day commerce wouldn't you sleep well knowing your precious metals might feed your family and help sustain them through hard times.
Paper dollars come and go-GOLD lasts forever. |
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Stock Market and Gold Crash, Are We About to Repea
Forum Locked
I'll take PMs (preferably silver
) and hold them indefinitely over having FRNs right now given the fact that our fiat shell game is about to tank.
