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Archive for October 2008
Bottom in gold?
23/10/2008 by Philinje.
Fingers crossed, $700 is the low in gold. We almost got there about an hour ago, and it feels like the pressure of the ridiculous dollar short covering rally is maybe finally letting up.
The dollar might drop next Wed if the Fed announces a rate cut, or tomorrow when OPEC announces a production cut.
I think it goes without saying that physical gold is a very good idea right now. The physical demand is huge and that will eventually overpower the electronic futures price, which has been a joke.
Folks, deflation - or rather, de-leveraging - is about to end. Give it about 4 weeks from now and inflation will start to creep into popular consciousness, again. The dollar will sink like a stone in a few months.
I’ve started buying gold coins and just found a fantastic web service called BullionVault.com. These guys buy actual gold bars and store them in 3 different vaults, depending on your preference of jurisdiction - NY, London or Zurich. You can purchase as low as .01 kg, which at the moment is about $250. Very easy to set up and use, and excellent charts and info as well.
It’s guaranteed the physical price is higher in reality than the futures price - you can see it in premiums over gold spot on coins especially, because there is a worldwide shortage of them. Eventually, someone will deplete physical gold at Comex and the electronic price will shoot through the roof.
But before then we’ll see the dollar ease off. I think after the election it will actually drop a bit and maybe stop at 78 or so on the USDX. Then it might go up when the next wave of selling in equities happens. But by then the new huge spike in money supply will start hitting the economy and inflation will be off to the races.
Whenever we get our short-lived rally in equities, when the Dow gets back up toward 10,750, it’s time to get out of stocks. Everything. There will be another huge move down after that, then a minor rally, and probably another crash down to the final bottom. That could be in 2010.
The actual bottom in equities is anyone’s guess, but it will very likely be below the 2003 low at 7000 on the Dow. Maybe a lot lower.
I do think in the rallies the Nasdaq will outperform, but don’t get caught in a bear trap. And at some point the poor gold stocks will come roaring back.
Posted in Gold | Print | No Comments »