GOLD RISING AGAINST ALL CURRENCIES

The question was posed that perhaps gold is only rising because the dollar is falling. While every C-wave has been driven by a collapsing dollar you will see in the next several charts that gold is rising in every currency. Every country is debasing their currency.

As you can see gold is rising in all currencies even in the strongest of all currencies, the Yen.

What’s more, gold is also rising against all other commodities since late `05.

Remember how I’ve pointed out that oil was the leader during the first phase of the commodity bull and how it should under perform during the second phase. That is because the fundamentals are now impaired in the energy markets but are improving in the precious metals sector.

I’ve been of the opinion that the gold:oil ratio will now remain in a range above 13 for the rest of the commodity bull with occasional spikes above 20 as C-waves progress.

At the moment the gold: oil ratio is at 17. I expect that will move up to or above 22 by the end of the current C-wave sometime this spring.

243 thoughts on “GOLD RISING AGAINST ALL CURRENCIES

  1. Gary

    STK,
    There is a link in the upper right corner of the home page that will take you to the premium website. I have several reports there that I have unlocked.

    You can get an idea of what the daily updates invlove by reading a few of those free reports.

  2. Samson

    Gary–First time posting here, but as a subscriber, I thought others might be interested in this question. Martin Armstrong just posted his latest gold missive. Was curious if you’ve had a chance to read it and your thoughts on his cycle analysis (recognizing it is different than y ours).

  3. Wes

    Gary,

    I tire of hearing of the low stock market P/E’s of the good old days. It just never happened.

    Since 1970, the average 4 quarter trailing P/E for the stock market is 20.85.

    Now, the 4 quarter trailing P/E is highly dependent on interest rates. For purposes of this study I have defined the average interest rate to be the total of the t-bill, the 2yr bond and the 10yr bond divided by 3.

    When interest rates have been between 0 and 5%, the 4 quarter trailing P/E has been 23.86 during the last 40 years.

    When interest rates have been between 5-10%, P/E has averaged 19.44.

    When interest rates have exceeded 10%, P/E has averaged 9.35.

    If you’re waiting for high interest rates to enhance your gold holdings, good luck.

  4. catbird

    I’m really hoping for a nice healthy correction in silver this week so I can put more money to work.

    If we get it, I think I’m going to sell a few December 72 puts on AGQ to pocket a nice premium. I figure if AGQ gets down to $72 I’ll be happy to own more of it. : )

  5. Gary

    Actually no secular bear market in history as ever ended until P/E’s reached single digits and more importantly dividends were at or very close to par with P/E’s.

    Interest rates are irrelevant.

    A secular bear market has nothing to do with interest rates. It has to do with valuation and human nature.

    Long term bear markets don’t end until the pendulum swings to extreme undervaluation. That’s the way every one in history has ended and it’s the way this one will end because human nature is still the same as it was in 74, 82, 47, 37, 32, 20 & 09 ( I think I got those bottoms right).

    To think otherwise is to expect this time to be different and it’s never different.

  6. Wes

    I just quoted you the facts. If that looks to you like P/E ratios are not dependent on interest rates, then I don’t share your viewpoint.

  7. Gary

    Wes,
    An average PE over 40 years is meaningless. During that time P/E’s fluctuated between 42 and 7. At the secular bull market top they hit 42 at the 74 and 82 bear market bottom they were 7.7 & 6.8.

    If I remember correctly Hays was trying to peddle his undervaluation theory either right before the 07 bear market started or perhaps it was in early 08 I can’t remember exactly when it was. But obviously he missed by a mile (actually several miles).

    Trust me this bear market is doing the same thing all bear markets do. It’s cleaning out the excesses and eventually we will see multiple compression take stock valuations down to ridiculous levels.

    That’s the point where we will sell our hideously overvalued gold and buy great companies for pennies on the dollar.

  8. Shalom Bernanke

    I kind of miss all the back and forth banter and attacks. It took the focus of the Fed’s criminal enterprise which rots your currency every single day since we convinced you to let us “issue money”.

  9. Wes

    Gary,

    You’re exactly right about Hays and his model being completely wrong about valuation in 07. In fact, he hadn’t been right about valuation this century.

    As a result of his bad call(s) (he was pretty embarrassed by all this) he got a hot-shot data man to come up with the model he is currently using. He shows the back testing results on his web site.

    As I said, it’s a proprietary model, so I know little about the exact details, but he has discussed it extensively. His site offers a 3 day free trial, more than enough time to evaluate the model (which he discusses at length in an archived article).

    I’d love for you to take a look so we could explore it in more detail.

    Please don’t just assume it’s wrong because you “know” we’re in a long term bear market, because I am also aware of other bear market predictors ( developed by people completely independent of Hays) that haven’t triggered either. One is the Confusion Index.

    Also, there are economic indicators in addition to the Conference Board’s Leading Economic Index that are quite strong.

  10. Shalom Bernanke

    I somewhat enjoyed the entertainment before, with the arguing and attacks. It took the focus off my criminal Fed and our foreign counterparts, which have stolen the value from all paper currencies.

    Now go back to your tv’s, and forget what I’ve said. Instead, remember that everything is ok.

  11. Gary

    Wes,
    Don’t forget the Fed threw several trillion dollars at the economy. That will briefly buy one a reprieve but ultimately it just creates a bigger problem.

    We got a front row view of this in action during the last decade as Greenspan opted for this “cure” when the tech bubble burst. The end result was he created a housing and credit bubble.

    When those burst it gave us the most severe recession and worst stock bear market since the Great Depression.

    Now Bernanke is going down the same road. The end result will be the same. It is going to ultimately create and even bigger problem than the bursting of the credit bubble. It is going to lead to currency problems which is many multiple worse than a credit bubble imploding.

    Bear markets are an important component of capitalism. They serve a purpose. That purpose is to clean out the excesses created during the preceeding bull.

    Then problem comes when governments try to prevent the bear from doing what it needs to do. Their interventions just lead to more and bigger excesses that still have to be cleansed from the system before the next bull can begin.

    And that bull has nothing to do with interest rates.

    The simple fact is that a new secular bull market can’t begin until we cleanse all this excess debt from the system and we need the next “new industry” to come on line.

    Once those two conditions are met and stocks reach true bear market bottom valuations then we will see the start of the next secular bull market for stocks.

    In the meantime don’t get distracted by fancy proprietary valuation models. Just stay focused on the one remaining bull market. And when the cleansing is fianlly allowed to happen and valuations do reach true extremes then be prepared to sell your gold and buy stocks with both fists.

    And trust me when that time comes it’s going to be the hardest thing in the world to sell your gold and buy stocks.

  12. RA

    A recent quote from Richard Russell…
    “Both the Congressional Office of Management and the Treasury list a total shortfall of $4.5 trillion coming due during the next 12 months. And this shortfall is supposed to be paid off with less than half a trillion dollars.

    How will this work? Easy, they’ll have to print the money. This will put pressure on our beloved Yankee dollar. As the dollar fades away, it will require an increasing number of dollars to buy an ounce of gold. This, then, is the secret of gold’s relentless climb.”

    It looks like it does not matter what the outcome of the Nov elections is. As long as there is a huge debt to be dealt with and whoever is in office will still have to face the issue. Gold will continue upwards.

  13. TZX-1138

    Clearly gold and silver hold special status to the financial powers and clearly they are stomped on heavily to try and keep lower.

    FROM RICK ACKERMAN:

    “…Just look at this comparison graph (above) showing the extent of forward selling (days of production) by the largest traders in various commodity markets to get a feel for the level of forward selling that gold and silver are subjected to by the big commercials, compared to other commodities. Why would world markets need so much forward sold silver and gold? Doesn’t everyone know that gold has very limited industrial use (especially compared to platinum or copper), and since photographic storage has moved from cellulose to silicon, industry’s chief consumption points for silver have also diminished drastically. And, if this much gold and silver really is changing hands out there, then why are eligible COMEX inventories sitting at 20 year lows? If the Big Commercial traders are laying on these enormous short positions as part of a legitimate hedging strategy, then why wouldn’t the same strategy work with crude oil? Or Wheat? And, most notably — why wouldn’t this same hedging strategy work with copper? Is it purely coincidence that there is so much concentration by a few mega-banks on the short side of the open interest in precisely the two elements that have served as the most viable forms of money for longer than any other medium in human history?

    http://67.19.64.18/news/RickAckerman/2010/9-23ra.jpg

    –TZ

  14. TZX-1138

    Something got cut from my last post.

    I was proposing that because moderation of EACH post is insane. So when gary is in bathroom or climbing we can’t talk?

    And blogger doesn’t appear to allow white or blacklists. So the options appear limited.

    –TZ

  15. TZX-1138

    WES,

    Discussing AVERAGES of P/E ratios is like saying the average of gold last decade is $700 – it isn’t a very useful measure to either discuss or make money from. What is relevant are lows or highs of significance that can be bought or sold. I don’t want to get into the whole interest rate thing, but Gary is right regarding how this will end. Valuations will continue to grind down until the exesses are wrung out and PE’s return to single digits.

    It will help all to visualze here
    http://www.decisionpoint.com/TAC/SWENLIN.html
    (bookmark..it updates continually)

    The first chart is the one that matters, the second is peak earnings valuation which I think it’s useful.

    You will see that NOW…*ten* years after the stock market peaked, it is STILL currently at a *worse* valuation than the 1929 peak.

    This situation will most likely not be resolved with a crash (you guys shorting should realize this). It will resolve with a flatline around dow 10k for another decade or so while inflation errodes value and gold catches up.

    –TZ

  16. TZX-1138

    My take on metals here for what it is worth. This is the week ‘they’ HAVE to get this stuff lower if there is any hope of slowing things.

    Last week was the first weekly close above that large gold wedge. Having it hold or go up this week pretty much seals the breakout. A pullback into wedge would make it a weekly fakeout (for now) and give some weakness (last week I was talking about a daily fakeout).

    With everything at or near new highs after a 2 months strong move it simply has to happen now. They don’t get a much better to time to pull this off than now so if a drop does NOT happen this thing is gone.

    Note people should read this (long) post:
    http://www.zerohedge.com/article/guest-post-shoeshine-boy

    What it demonstrates/explains is that gold, unlike most other goods, has supply that DROPS as it rises. The guys in charge know this. The higher they allow it to go the LESS is available and the tighter things get. That’s why they have to slow it and if they can’t they are in trouble.

    -TZ

  17. RA

    Hi Gary,

    With all this talk about gold being in a bubble, I am wondering if in one of your next postings talk about the conditions leading up to the previous gold bubble in 1980.
    History might teach us something about what a real gold bubble looks like 🙂

  18. Gary

    The conditions for a bubble to exist are the entry of the public into something they consider to be a “sure thing”.

    When we see lines at the local coin dealer then gold will be in the bubble phase.

    It usually takes about 1 to 1 1/2 years once the publis starts to catch on befoer the bubble finally runs out of buyers and pops.

  19. Gary

    The percentage gains will be much harder to come by and much smaller than in the PM sector not to mention the general stock market is still in a secular bear market.

  20. oa92000

    Gary,

    look at last 30 years chart,
    SLV from 5 to 20,
    GLD from 30 to 120,
    SPX from 100 to 1200.

    SO indeed GLD may outperform SPX next 30 years ( just a guess).

  21. aaronpalang

    This is one of the very few times when gold has not traded down into options expiration. This is incredibly bullish in my opinion, and dictates a continuation in the run up in gold.

  22. pimaCanyon

    oa92000,

    run the same numbers for gold, silver, and stocks beginning at year 2000. You’ll see that gold and silver are clearly in a bull market, whereas stocks have gone nowhere in 10 years. The next 5 to 10 years are likely to be a continuation of this pattern.

  23. pimaCanyon

    TZ,

    I just made a post, and it appeared within a few seconds. So it appears that no one is “monitoring” the posts. The only requirement for posting is that you have to post using your google account. No more Anon’s.

  24. John Fuller

    Hi Gary
    I should say that my post yesterday about gold rising against a falling dollar was in relation to the action of the past 2 or three weeks only.

    I posted it as a caution, really, that the current move is not necessarily motivated worlwide.

  25. Marc

    I for one, like the no-anonymous posting system. It’s ridiculously easy to create an account but takes enough effort to limit the frivolous, drive-by posters.

    Keep it like that Gary.

    Thanks!

  26. Peter

    Gary, based on your weekend report, you are expecting the daily low to come in this week ?

    I am thinking about when I should be adding my leverage back on, as I unloaded all of it last week.

    much improved commenting system.

  27. Onlooker

    For those who’ve asked how best to invest in this PM bull market I would suggest looking at the Tocqueville gold fund, TGLDX. It also has a good chunk of silver represented in it as well, and the performance has been fantastic (especially off the ’08 bottom but really throughout the bull mkt).

    Not meant to be traded (<120 day redemption fee) but good for long term PM holdings

    TGLDX holdings

    fact sheet

    complete holdings

    Another very good one with a great long term record is the USAA PM fund, USAGX, which is also more than just a gold fund.

    Performance comp chart

    chart

  28. Gary

    Well first gold has to form a swing high. Then if it quickly gets reversed before leading to a correction it would be a sign that gold may not correct here at $1300.

  29. Jerred

    Steven,

    A swing high is negated when the market trades back above the high and closes above the high. Volume usually comes in because the shorts have to cover (buy stops are hit).

  30. Gary

    Price is meaningless. The percentage gain is all that matters.

    One will make the same profits if they were to buy one share at $1000 and it rallied 10% as they would if they bought 100 shares at $10 and they rallied 10%.

  31. Peter

    Those Ultra ETFs are great if the market is moving in a single direction without too much deviation. If the move up becomes choppy, these ETFs tend to underperform. Personally, they worry me a little.

  32. Wes

    Peter,

    I trade the QLD, which is 2xQQQQ. I’ve traded it for years and it always seems to yield 2XQQQQ.

    If Q’s up 10%, QLD up 20%. Same thing on the downside.

    I’m not sure why this one is different, or if any others are like this one.

  33. David Kafrick

    The problem with the leveraged ETFs is that they are supposed to track the underlying on a daily basis. SSO will go up 2 times more than the SPY on a daily basis, which doesn´t mean that it will be up 2 times the SPY after 30 days, for example, because the leverage is adjusted every day. So usually the leveraged ETFs will always underperform on a longer time frame.

  34. Gary

    However they can outperform as long as the trend is in the right direction. Case in point from the Aug low SLV is up 20.4%.

    During the same period AGQ is up 43.6%.

    I’m using AGQ right now because this is the single best opportunity for the C-wave to finish and the trend should be strongly higher. If I thought PM where going to be locked in a trading range then I would avoid ultra funds.

    I will certainly exit AGQ when I think the C-wave is coming to an end.

  35. Peter

    wes .. you tradng it or holding it ?

    If you are trading it … you are fine , if you are holding it, then I suggest you google “danger of leveraged ETFs”. I have read it because I got hammered on one.

  36. Peter

    Gary is bang on .. like I said, if the trend is in one direction, you should outperform. If the market is choppy, you will lose , even if the overall trend is up.

    Dont forget, these reset daily. If you are up 10% one day, and the next day down 10% .. overall, you are down.

  37. Gary

    Even if you are trading unleveraged ETF’s you will end up down if you gain 10% and then turn around and lose 10%.

    The ole’ saying “it’s not how much you make that determines success or failure it’s how much you lose” has a lot of truth to it.

    This is why it’s so important for traders to control risk.

  38. Keys

    From what I understand the following is the issue. Let’s say one starts with $100 over 4 trading days. Say the stock goes up $10 one day, $10 down the next, up $10 the next and then down $10 again. The underlying asset stays at 100. But with a double ETF and assume you put $100 in….the first day the return (1+10/100*2)*100=120, the second day would be (1-10/110*2)*120=98.18, the third day would be (1+10/100*2)*98.18=117.82, and the final day would be (1-10/110*2)*117.82=96.4.

    So despite the underyling asset returning 0%, the double ETF returned -3.5%. One should be also concerned with 1x funds too. The real problem is the etf being based upon percentage returns and not dollar returns.

    Of course if the trend is up, you can make a mint.

  39. Gary

    I suspect the “dollar sentiment index” is another Precther creation. It’s pure BS.

    The public opinion poll is at 40% as of last Tuesday.

    Anytime you see something claiming sentiment is 98% or 5% it’s almost always a bogus index to back Precthers shock and awe marketing strategies.

    And even if I’m wrong about this being a Precther creation it’s still total nonsense.

  40. TZX-1138

    I continue to be suprised there hasn’t been a hit or pullback on the metals. I don’t NOT thing the guys in charge have lost full control.

    As the dollar looks to be getting some strength this evening and the metals look week I see this story out:

    http://online.wsj.com/article/SB10001424052748703694204575518222145769804.html?mod=WSJ_hpp_MIDDLETopStories

    Remember that the Fed will communicated, behind the scenes, with reporters like this when they have policy ‘adjustments’ or propaganda they need to spread.

    Smells to me like something is starting. Note that the inclination of this article is that QE2 will not be as drastic or sudden as people are expecting.

    –TZ

  41. Gary

    Wes,
    Actaully even QLD will underperform over the long haul as the market trades agasint it. Case in point the NDX is only down 5.6% from the 07 highs. While QLD is down 41.6%.

  42. TZX-1138

    You guys trading AGQ over silver futures really don’t have the ability to think critically (or you are simply stubborn).

    The arguments have been plainly made before. I am amazed when people get hard facts yet continue in the opposite direction.

    –TZ

  43. Shalom Bernanke

    That’s tight, TZ, we have not lost any control over mkts. Witness this “flash crash” in a normally quiet stock. Imagine you bought at 40, had a break even stop placed there, and got filled at $5 bucks today? LOL! Just a taste of what’s to come.

    Confidence is shot, and only a fool would buy/hold stocks any longer, even in a 401(k) We’ll continue to shake things up, take people’s money, and send more Americans into poverty every day.

    We’re coming for you next!

    http://www.zerohedge.com/article/44-4-less-second-todays-flash-crash-brought-you-courtesy-nasdq-and-broken-circuit-breakers

  44. pimaCanyon

    Wes,

    Here’s a quick calculation you can do. Take the April high in QQQQ and QLD. Take today’s close in both.

    If you run the numbers, QQQQ is down 2.488 percent. But QLD is down 6.954 percent. If QLD tracked QQQQ over time and it always came out exactly twice what QQQQ did, then QLD SHOULD be down only 5 percent. Instead, it’s down nearly 7 percent.

    If you’re day trading, double and triple funds work great. But over time, they decay, and the choppier the market, the worse they perform.

    One way you can work this IF your broker will let you is to SHORT the double inverse fund that tracks the direction OPPOSITE to the direction you believe the market will go. In other words, if you are bullish, short QID instead of going long QLD. That way the decay will work in your favor.

  45. Gary

    Wes,
    It’s because from the March 09 low the market has been moving in the right direction for QLD.

    I gave the recent example of AGQ and SLV since the August bottom. SLV is up 20.4% but AGQ is outperforming at 41.6%.

    The double funds do fine as long as the market is moving in the right direction. It’s when the market goes against them that they start lose faster than the underlying asset.

  46. http://teknisk-analys.blogspot.com

    Gary: No it´s Jake Bernsteins creation, but I think EWI uses it sometimes. I really got no experience of his DSI-indicator but have seen Tradersnarrative recommend it and that guy is good. But it could be that the sentiment indicator isn´t really that good. I´ve just seen it a couple of times and then it has been pretty good timing.

  47. Steven

    I think the sentiment indicators that Prechter uses are DAILY and not longer-term ones. If I am correct (I thought I read this someplace) then sure there will be days when 95% of the people think the price will go in one direction or the other.

  48. Wes

    Gary,

    Isn’t that another swing reversal in the stock market ?

    I was trying to make the point Friday when the market gaped higher that it rarely pays to buy strength.

  49. Gary

    No swing high yet. There is no guarantee that any rule will work 100% of the time. Look what would have happened if you waited when silver shot out of the consolidation.

    Most of the time you just have to take your signals and if it suffers a bit of a drawdown…well that’s investing. If you are never going to allow yourself to experience a drawdown then I can guarantee you are going to lose money in this business.

  50. Shalom Bernanke

    Where is Gary_UK? He should be gloating that he’s only down 10% more, but now the decline has started so he’s right.

    Perhaps he couldn’t figure out how to open a google account?

  51. TommyD

    Good morning all,
    I slept through the alarm. Good thing too.
    Ok, Gary or anyone, If we a lucky enough to receive a over-bought correction then maybe the Fibonacci retrace will work on some of my holdings. Maybe look for a 23.6 or a 38.2 retrace???
    WOW, just as I type this my account rallied about 1%. Good news or people buying the dips???

  52. Onlooker

    Wow, that may be all we get for a correction given this new strength to a new high in gold.

    About 25 pts to the low overnight on the futures; and that was for only a blink of an eye (long one minute candle).

    It sure will get some chasing here I would think, as they never got an opportunity to buy any kind of pull back, unless trading futures (which is a relatively very small bunch, and not much “retail”).

  53. Gary

    There’s a very good chance that todays move is confirming a runaway move.

    Although technically today will be an outside day so we don’t really have a swing low.

  54. Bede

    Gold Spikes After BOE’s Posen Demands More QE, Wants To Buy Corporate Debt
    By Tyler Durden
    Created 09/28/2010 – 08:19

    All is fair in love and central bank war. Which is why we see the following headlines from England, showing just how important it is in the global game theory, which has now turned to outright war, how important it is to defect first.

    * BOE’s Posen: I think further monetary easing should be undertaken in UK, subject to debate
    * BOE’s Posen: If QE does not work, then time for further fiscal stimulus, corporate debt purchases
    * BOE’s Posen: Additional monetary stimulus should begin in the form of addition QE gilt buying
    * BOE’s Posen: Possible that QE will not be able to create sustained recovery on its own
    * BOE’s Posen: Still open to argument, vote for easing at Oct. MPC meeting is not foregone conclusion
    * BOE’s Posen: Sees CPI falling well below target without stimulus, 1990s Japan style scenario possible
    * BOE’s Posen: Possible that QE will not be able to create sustained recovery on its own
    * BOE’s Posen: Most signs point to CPI falling well below target, wage spiral seems impossible
    * BOE’s Posen: Believes better BOE and more central banks did large-scale asset purchases together

    Gold obviously jumps, cable drops, and central banks everywhere are battening down the hatches

  55. Keys

    I hate gold! Worst beast to invest in. Just when you think it will do what you want, it turns around gives you the finger and goes on its merry way. Now we have a potential head fake to a head fake.

    I am back in at 120%…I did sell some leverage like many others, but I am getting nervous about missing the big picture. I am a horrible trader, and yet I can’t resist my sinful ways at times. Anyways may go up to 125% if we ever do correct, if not old turkey and go about life instead of trying to save 1% when risking hundreds of percent. I fully expect a pull back, but I can’t trade it.

    Can’t wait until lunch for that beer.

    As always good luck to all.

  56. Daniel

    I am with you keys–
    I almost hedged (with extra cash) to make the impending correction less painful. I did not– (just because I had not convinced myself yet) and what do you know a very nice reversal.
    Crazy stuff!

  57. TZX-1138

    I caught myself getting emotional and panic buying this morning. I closed those positions (small profit) and went back to what I’ve had.

    I want to buy cause I’m “missing it” like everybody else is feeling. The math and cold logic is saying that’s crazy right here.

    I’m gonna override my emotions and wait for any additional buys.

    –TZ

  58. TZX-1138

    I’m in touch with a few others who watch/trade market too and the rush to buy seems universal this morning. Historically that doesn’t work out well.

    If you even scroll up and look at my and other comments we have all mostly become convinced this will never drop again for this move. Maybe it wont. I just know I got burned in the past when believing that. It will ALWAYS drop again at some point in the future.

    I agree it looks incredibly strong and we might be at that situation where it simply overwhelms anybody short (or waiting to buy) and surges. I don’t know.

    I do know that if I was long with massive gains from the 1155 low that I wouldn’t be adding here. So the fact that I don’t have a huge position and am missing gains doesn’t give me an additional reason to buy.

    –TZ

  59. TZX-1138

    This is a high emotion day. We all feel it, no? That usually signals something significant. Either recognition of a massive runaway is setting in, or this is a big capitulation buypoint and we decline for the next few weeks.

    It’s one of the other. This is not a normal day.

    –TZ

  60. aaronpalang

    I still think October is shaping up to be absolutely massive. 1320-1340 this week is easily attainable.
    That was one very weak correction, I think the options exp. action was very telling…
    We shall see

  61. TZX-1138

    If *somehow* the metals today reversed back down into the LOWS for close we would have our answer. As INSANELY unlikely as that seems you have exact reason it would signal a buying capitulation.

  62. TZX-1138

    If *somehow* the metals today reversed back down into the LOWS for close we would have our answer. As INSANELY unlikely as that seems you have exact reason it would signal a buying capitulation.

    The fact that I’m even suggesting it might happen in and of itself feels stupid. That in and of itself is important.

  63. Keys

    I fully agree with TZ, we are due for a correction.

    But we were due a week ago. I am not trying to convince anyone that they should buy in now; I just can’t bother with getting anxious over each percentage move anymore. I most likely will suffer a drawdown, but at least I will be able to sleep now since I do have my positions fully in. I was nervous about QE2 coming at any time. I was nervous about BOJ announcing another round in an attempt to crush the Yen. A whole bunch of other fundamental items that suggest that PMs should go up much higher in the long-run. Tie that in with Gary’s note to being in a vacuum after we break these current levels. I had a very hard time sleeping over the week-end knowing that I was going against my own investment strategy (mind you only on the leverage). Found my opportunity to get back in at a price slightly below my sell price on Friday, so I took it.

    Tie that in with gold being a prick of an investment, blaagg I had enough. Old turkey 101 even for my leverage now; I will modify when Gary calls for a D-Wave most likely. In fact I am not even going to look at my account for a week…I was focusing too much on the wrong things, need to break that sinful pattern now.

  64. Daniel

    Keys-
    We think alike– You express my nervousness,anxiety,and logical reasoning better than I can. Thank You.
    It allows me to do a simple post!

  65. Shalom Bernanke

    How come my comments disappeared? I’m a sub!

    Don’t tell me Gary is part of the crooked propaganda we get everyday? Can’t be, so must be somebody is whining or threatening Gary about my avatar?

    What’s up?

  66. Shalom Bernanke

    Hmmm. My apologies, but the comments are up again. Don’t know what happened, but it’s been spotty since Gary changed the system to register first.

    Is this happening to anybody else?

  67. TZX-1138

    Part of the problem is that if Gary deletes a post it doesn’t say that it was there but ‘removed by blog owner’. Instead it just disappears.

    However I also seem to get posts that come and go due to the service itself.

    Between the two of these events happening you never really know what the issue is.

    This is by far not the best on the internet, but I guess it’s marginally good enough.

  68. Nick

    Wes, To form a swing high again on the SPX we should not drop below today’s low and close above yesterdays high – Gary can correct me if I misunderstand this concept.

  69. Robert

    Wouldn’t today be the swing high in PMs?

    Kind of the like the theory that the dollar would break below 80 (swing low) and bounce, analogous to silver breaking 21.50 (the last two days), and now we should get our bounce?

    It is one confusing bull. HL was at 5.89 today! I though I’d only get that when silver was at 20.5 or lower!

  70. Josh

    What are y’all using as a trading platform? Anything good, bad, indifferent?

    I have ShareBuilder and I don’t like it much. Market orders are $10 up to $10k in order size, then it switches to some ridiculous percentage basis. Net effect is I can’t place any order over $10 grand without doing it in pieces. Not efficient.

    Any help out there?

  71. LowTax

    Dang it! If that’s the shortest pause for breath miners are going to take, Gary’s runaway move is ugly reality. Barely caught SLW in negative territory before it popped back up and I now have to chase a few others after having lowered my margin last week. This thing is a monster!

  72. fubsy_cooter

    Dang it! I was really looking forward to a measured pull back and swing low so I could add to my parent’s and my accts. This gold game is getting ridiculous. And, its just getting started. : )
    Oh well, I’m not adding on a day like today. We should have more chances. or not.

  73. Peter

    Gary, looks like we will have an outside day on the Gold charts today. Would that constitute a swing low ? or would we need a little follow thru tomorrow ?

    this is going to get interesting isnt it.

  74. TZX-1138

    RSI for silver is 83; RSI for gold is 82. In years of history those readings are rare and the results within a few days later are universally down.

    Yeah…I’m aware this is broken record talk from me at this point. Just giving out the numbers.

  75. Robert

    Who wants to bet PM stocks will be 3% lower then EOD today by the latest, next Wednesday?????????? Essentially that would mean the HUI would be around 496.

    I’ve got 5 Vegas burritos on it…

  76. TZX-1138

    ROBERT,
    3% lower on a PM stock is like a sneeze or afterthought. A real correction here after 2 months of gains would be 10-15% on some of these stocks like SLW.

  77. Shalom Bernanke

    Thanks Frank, and to show my appreciation I’m going to have a talk with him about getting you a sweetheart loan at 0%.

    How’s $25 billion sound? Don’t worry, it’s not real anyway and we print it as fast as we can 24/7!

  78. Gary

    I should have reacted faster, I shorted silver and slw and was up over 2.5% an hour within open today, now obviously that 2.5% is gone.

    Anyways, I’m holding my urge to chase right now, and will test my patience and see my buy prices within 6 trading days.

    I don’t think this is the week for silver going parabolic, and the odds are in a shorts favor right now I’d have to argue…

    Where you at Gary??????

    Robert

  79. Gary

    Robert,
    I reposted your comment for you. Blogger dropped it for some reason.

    Let me tell you something I learned a long time ago.

    Never, never, never, never, never short a bull market.

  80. Robert

    I know you’ll answer this in tonight’s report, but, Gary, when do you actually think there will be the next retracement/correction?

    It is tempting to short bulls because the retracements are usually heavy, but I do agree with you, and I guess I kind of got egotistical after playing that last run-up so well- similar to what you had said you were feeling, “playing the wiggles like a fiddle”.

    I do remember the underlying message, Old Turkey, is basically 100% certain of making more in the long run than trading a bull, buy I couldn’t resist my urge- I like making big sums, daily!

  81. Robert

    Gary, call HSBC and Morgan and ask where the price on PMs is going tomorrow.

    Call Hong Kong, and London, too if need be. Then ask them about the hour by hour breakdown for the next consecutive 5 trading days.

    Show us your clout G-Man!

  82. catbird

    FOR ALL THOSE WAITING FOR A CORRECTION IN PMs:

    I did you a favor.

    After much debate on whether or not to put more money to work lest this be a much-dreaded “runaway” move, I bought a half-position of AGQ, increasing my AGQ stake while still keeping plenty of powder dry. This was not easy. Silver has not pulled back at all in forever.

    With my order being final, no doubt the PM gods will smile on us with a nice correction of 10% or so in the next week.

    You’re welcome! Don’t ever accuse me of not being a team player.

  83. Gary

    Pretty unlikely we see a 10% correction in gold. Maybe to $1265 but I doubt its’ going lower than that. And the breakout above $1300 is suggesting gold is ready to make a move to $1400.

  84. Bede

    Gary,

    When you repost another’s comment, please make it clear by saying so. “Repost of Robert’s message” or some such heading would be very helpful.

    Thanks

  85. catbird

    Gary wrote:
    “Pretty unlikely we see a 10% correction in gold. Maybe to $1265 but I doubt its’ going lower than that. And the breakout above $1300 is suggesting gold is ready to make a move to $1400.”

    ————-

    Right, odds are gold doesn’t correct that much. My money is in silver though.

    I figure if gold corrects ~ 4-5% here silver could correct closer to 10%, and AGQ, my vehicle of choice, would thus get considerably cheaper.

    Thus I only bought another half-position today at the close.

    What I want more than anything is a meaningful correction so I can put the rest of my money to work in AGQ and SIL. I want to make my buys and then go Old Turkey and not even log into my brokerage account until a D-wave rears its head.

    I hate mentally agonizing with the endless “ooh, do I add more money now or not?” quandaries.

  86. Gary

    LOL my decision to start lifting weights again has already damaged my climbing ability immensely, so I might as well be happy gobbling up some burrito’s 🙂

  87. Shalom Bernanke

    Whoa, ease up everybody. I don’t want you buying tangible items, especially PM’s, with the free paper I make non-stop.

    Can’t you just keep dollars, or buy stocks and bonds to help me out?

  88. Keys

    Nice big picture report tonight Gary. Something I need to hear from time to time too. The community is much better on the blog too I find since the change. More proactive instead of constantly saying bonds are bad (which who cares anyways) and constantly defending attacks.

  89. LowTax

    Gary, I think that after this C-wave, you will NEVER EVER have to buy your own Mexican meal again. Your subs will be more than glad to foot the bill for the rest of your life. 🙂

  90. Thommo

    Sorry Gary. Not yet a subscriber, only just referred to your blog, so just familiarising myself with your analysis and measuring accuracy before committing funds.

    Burned before, but understand some comments saved only for subscribers.

  91. Chrys

    Gary – are you becoming concerned about gold sentiment? It’s at 71; up from under 60 recently without much pull back during its rise. Maybe we are in the crazy phase of the rise and sentiment can go up to the 90’s before spelling trouble.

  92. Gary

    If this is a runaway move, and it’s looking more and more like it is, then cycles and sentiment can just be thrown out the window.

    The fundamentals driving this move (Ben’s printing press) will just roll over all of our timing tools.

    Don’t expect this move to end until the dollar puts in an intermediate bottom. That isn’t due for another 9-14 weeks.

    My best guess is the dollar tests 71 before this intermediate cycle bottoms later this winter.

  93. Shalom Bernanke

    Good morning folks. Sorry about your USD, but I have another long day of printing “mad chedda” ahead!

    Please quit buying PM’s, and all commodities for that matter. You’re supposed to be patriotic and hold paper to support the illusion of stability and prosperity.

  94. Sandy

    Gary,

    With Silver being stretched 20 % above 200 dma and sentiment for PMs at fairly high levels, would you not expect some kind of regression to the mean soon before the rally can continue.

  95. Gary

    In theory yes. But if the miners can break out to new highs all bets are off.

    At that point we could see the HUI stretched 40-60% before a significant correction.

  96. GGuy

    This is one of the strangest half-cycle low i’ve seen. It is lasting too much. It starts looking like distribution.

    There’s something wrong with it, it should have already bounced, and higher than this.

  97. Gary

    Don’t make the mistake of shorting based on nothing more than what you think should be happeing.

    Just wait till you see large selling on strength numbers pop up.

    It’s as simple as that. Until the big boys start selling you don’t want to be on the trackes in front of the train.

  98. Shalom Bernanke

    Especially on the tracks in front of a G-Train!

    American peasants, please sell your gold and support your country. Not only do I want to buy it, but we cannot have real value finding a home in hard assets. Support your local paper!

  99. GGuy

    You are right. I sold my long positions last week and have been waiting. I planned to go long again today or tomorrow but now i’m not sure anymore.

    Maybe i will miss this train, it does not matter, there will be a fast short train coming at the end of the daily cycle.

  100. Gary

    I have to ask. Why would you forego big gains on the long side following the trend to try and catch a small trade on the short side against the trend which you will have a tough time trying to time the bottom of and likely just lose money?

  101. Steven

    Gary,

    Perhaps you can do this in one of the reports but would you explain if your targets are the same assuming this is a runaway move instead of the two-part move you were earlier expecting and perhaps any idea of how you think this will play out in the interim (which I think you alluded to in the report last night).

    Thanks!

  102. Steven

    It’s grea to expect the miners to break free from the broader market but they really don’t seem to be doing so. Just looking at GDX or GDXJ and they appear to be influenced by the market and not acting independently.

  103. Gary

    Hardly. The miners are on the verge of breaking out to new all time highs. The stock market is still down 26% from all time highs.

    Don’t get distracted by the day to day wiggles to the point where you lose sight of the big picture.

  104. GGuy

    @Gary: i was thinking “intermediate”, i wrote “daily”.
    I do not short dily close on an upgoing intermediate. Usually i just go flat and buy again lower.

    But i have bad “feeling” from the cycle indicators and moving averages, and i like to go possibly “low risk”. So this time i stand out and watch.

    Markets will not close tomorrow (or maybe they will).

  105. Sandy

    Guys,

    I was placing an order for AGQ in my retirement account at Ameritrade. It mentioned special margin requirements.

    I have never bought 2 X funds like AGQ or options before, hence not familiar with margin requirements. Can you please explain.

    Will I be ok buying AGQ for the full cash available in my account or do I need to leave some spare cash for margin.

    Thanks.

  106. Gary

    AGQ is marginable at 60% as opposed to most individual stocks which are 30%.

    First you need to decide if you are willing to leverage up in a retirement account. It would be easier for you just to talk to a rep at Ameritrade than have me try to explain it to you here.

  107. TZX-1138

    AARON,

    >you cant margin up in retirement accounts anyway, its just a precaution that they have to mention.

    Actually you can – futures and single stock futures. 5x to about 20x depending on what you want to get.

  108. TZX-1138

    Good luck to you guys leveraged or adding (as per Gary) around here. I have only core metals stuff which is way too small (always is when things are going up), but I refuse to chase or increase at these levels and technical points.

    It’s hard to do. I’m not happy about it. I feel like buying hand over fist. It might be a mistake, but, *nope*…won’t do it here.

    Call it what you want, but everything is screaming gold/silver are horribly overextended. I’m not saying this vaguely or emotionally, I’m saying it based on years of experience and *mistakenly* buying in similar situations that I think we have now. Maybe this is the exception? Maybe this is the one that never stops?

    I’m gonna give this a few more days and then reevaluate. If I’m wrong I’ll deal with it.

  109. TZX-1138

    One big flag to look for is if they can get gold back below 1300 and into the large wedge again by fri day close. The wedge starts around 1285. If that doesn’t happen, It is one more signal the wedge breakout is real (which would also argue why we have such strength).

  110. Gary

    As I said in last nights report the HUI ios only 15% above the 200 DMA. That’s not even vaguely extended.

    You might want to go back and take a look at other C-waves and see what happens. If you don’t make a decision at some point you run the risk of sitting on the sidelines through the whole move.

  111. FH

    Often mining investors get caught up in one of the many powerful advances of the sector and tend to think that the advance will continue further and more powerfully than the last advance. They think this time it’s different. Then, the music stops. Gold and especially silver drop fast. The miners follow. I think either buy and hold or don’t get caught up in the “This rally it’s different” thinking.

  112. Sandy

    TZ,

    I am asking myself: Do I believe Gold will be at 1500 $ and Silver at 30 $ sometime in the next 6 months. I believe it will be because fundamental drivers are in place for higher prices ahead. I also think that the risk at this point in time may be missing the move since the pullback if it comes, will be shallow & not a long protracted affair.

    Given these 2 facts, I want to get my PM positions in. I still have 30-40 % additional cash which I can deploy if pullback gives a great buying opportunity, though I generally don’t feel comfortable investing all my portfolio in PMs only and want to be 60-70 % PMs and rest in cash.

  113. TZX-1138

    Gary,

    You seem to only use 200dma and you are using it to call the **END** of this move. I’m not saying this C wave is ending. Please understand that and stop pretending that is my argument.

    There are plenty of other measures of SHORTER term overextension that argue for a pullback of perhaps 1-3 weeks BEFORE THIS C WAVE **CONTINUES**.

    Have I made my distinction?

  114. TZX-1138

    Gary,

    I will re-evaluate in a few days at which point the window for such an expected pullback to start will have passed. I said I expected it “in 2-5 days” yesterday I think. (If we close 2nd week outside the wedge I’m gonna be more worried too.)

    Yes…I’ve looked at plenty of past gold rallies. I was also *IN* them. You keep thinking I’m debating the long term bull or C wave here. I’m NOT. Please stop with the 200dma example. I get it. I’ve got measurements of when this C ends as well and we are *nowhere close*. I agree.

    I’m arguing that buying today or yesterday or maybe tomorrow is what is statistically wrong. Obviously it may not turn out to be wrong, but historically that was NOT the way to bet.

  115. Robert

    Gary,

    How do we know when Quantitative Easing is happening and then how do we know the extent of it?

    Do we tell this by the Fed’s balance sheet?

  116. TZX-1138

    Sandy,

    If you are not going leveraged and are simply following Gary, I AGREE with him that you should just get in, hold and wait. I have stated a couple of times that my comments (of whatever use) are directed at either:

    1) a person with continuing income coming in that wishes to ADD but wants to do so within a week or two time window and TRY (notice I didn’t say SUCCEED) in gaming things and trying to get a lower price.

    2) a person wanting to go leveraged (possibly significantly) who might be risking a quick blowout by doing so at levels like today (which is my opinion)

    As I’ve also said before, I tend to want to leverage, but that means I have to play the games of trying to time certain events. You are witnessing in real time through me the difficultly in doing that and the possible reasons not to try. Don’t believe I don’t understand that. I do.

    One of my reasons for the confidence on my side is that I’ve done similar plays on previous C waves successfully (although my flaws came later in not selling AFTER the C peak as soon as I should have).

    I hope this clarifies how my comments/situation differ from yours or perhaps what gary is suggesting.

    Note too that after this C wave I intend to switch to a more buy and hold situation than what I’ve been doing. It makes money, but I dont’ believe the difficultly has become worth it as much anymore. It was easier years ago.

  117. Gary

    The only time we will get a 3 week pullback in gold would be if the intermediate cycle has topped. Gold is only on week 9. not too mention the dollar still has 10 or more weeks to drop.

    I seriously doubt you are going to get what you are looking for in the next 9-12 weeks. And in the meantime because you are using large leverage you can’t enter.

    The bottom liine is that your leverage is costing you huge profits.

  118. Gary

    I have to say this is the 5th attempt at a breakout above 500 for the HUI.

    It’s also holding those gains so far. I think the odds are pretty good this will be the one that holds and never looks back.

    I have my doubts that we will ever see sub 500 on the HUI for the rest of this bull market.

  119. Keys

    All I can say is that I slept well last night, and didn’t look at my account once today. Just checked in briefly to see where gold and silver was and to read Gary’s update. I am not Napboy, but the ZZZs really did the body good.

    The biggest risk is being out of the market. The Titantic can’t change course.

    Gary I do have a question though. From your view in other C-waves, do stocks like SLW (really stretched right now) tend to moderate and allow other’s to catch up, or do they simply blow up more? Thanks in advance.

  120. TZX-1138

    >> The leaders can stretch up to 60% above the 200 DMA during a powerful thrust.

    >They have pullbacks of 10-15% along the way too.

    To be clear, I am *NOT* advocating try to time in and out during a major move and scalp 10-15% dips. That’s suicidal and how you lose your position.

    But, if you are waiting to increase and you THINK you have identified *high risk* periods in the market (obviously nobody can ever know for sure), then it might be prudent to try and not buy immediately ahead of such a decline if you think you are on top of one.

  121. TZX-1138

    AARON,

    I feel sorry for anybody not using Interactive Brokers for their accounts. Vastly superior in my opinion.

    And yes, they allow futures and single stock futures (as well as almost any security from any exchange in the world) in an IRA.

    IB is for relatively experienced traders. If you don’t understand margin or you think that it is better to buy a stock at $10 than $20 because you get “more for your money” then stay away. (No offense to anybody.)

  122. TZX-1138

    IB also allows OPTIONS and Foreign currencies. Basically they mostly allow anything.

    DISCLAIMER: This is not a recommendation to use IB or to trade in *any* of these instruments. You are responsible for your own actions and for getting in over your head and ending up broke living under a bridge. Seriously.

  123. Gary

    TZ,
    At what point do you realize you have missed a 14% move in gold and a 23% move in silver because you are tangled up in a leverage dilemma?

    If you just get rid of the leverage you could enter today and then head down to the pool for the next couple of months.

  124. Gary

    Here’s the other problem with heavy leverage.

    When the pullback comes one still can’t pull the trigger because they won’t know if the correction has run it’s course or not. And they still have the problem of a small move against them knocking them out for a large loss.

    Only now the trend is moving against them so it’s even harder to time the perfect entry.

  125. TZX-1138

    >At what point do you realize you have missed a 14% move in gold and a 23% move in silver because you are tangled up in a leverage dilemma?

    You should be a politician. A lot of very subtle logic traps and sidesteps in that question.

    “Why do you hate america and want the terrorists to win?”

    And I have not in any way been unclear at not having my desired position size as gold and silver have risen.

    I’ll address more after lunch. Your assertion/conclusions embodied there are not as clear cut.

  126. TZX-1138

    >At what point do you realize you have missed a 14% move in gold and a 23% move in silver because you are tangled up in a leverage dilemma?

    Maybe a quick rephrasing answer for now. Notice my key word additions:

    I have missed PART of the move in gold and silver attempting to profit through the CONTROLLED use of leverage (a “tangled dilemma” is not approprate language). This CONTROLLED use of leverage does not advocate application during times of extreme buying or over extension. The use of such leverage having been done SUCCESSFULLY before by this same person and resulting in HIGHER gains than permissable using only buy and hold (during C waves only).

    The outcomes of such a strategy during THIS C wave is , of course, unknown.

    Furthermore, you suggest it is not possible to ever know when to buy something on a decline. I put it to you that this is not an accurate statement. I suggest there are levels during declines whereby you can *reasonably* assert that a low has likely occurred. Application of money at one of those levels with leverage can result in a beneficial trade and higher returns in the end than buy and hold. Should such a level NOT hold, then there are usually 2 or 3 lower levels of similar probability. It is unlikely (especially during C wave) that you will not succeed with a buy in the first 1 or 2 points.

  127. TZX-1138

    My actions get me killed during D waves. And I get chopped up and mostly flat returns during A and B.
    Most my returns are in later levels of C wave. But since that is where we are now, switchig to buy and hold at this point throws away the gains I usually make that make up for all the other times. Assuming I can do this again, my best way to play it is to trade leveraged as previously on other C’s. Get OUT on D. And go mostly buy and hold starting on the next A.

    I’m pretty clear on my limitations here I think. I’m not trying to come off as some super guru or something.

    Lunch for now.

  128. RainmanInVegas

    Gary,

    You had asked for why could central banks care for yellow metal’s price.

    Here is Greenspan’s response”
    “If all currencies are moving up or down together, the question is: relative to what? Gold is the canary in the coal mine. It signals problems with respect to currency markets. Central banks should pay attention to it.”

  129. Robert

    It’s so amazing that leverage will somehow most likely earn you less profits.

    I leveraged HL at 4.93, not fully extended, and it did wiggle to 4.85, but almost 100% of the time it did go up from there and I slept well.

    Now I re-leveraged HL today at 6.36, but for some reason I still feel extremely comfortable doing this, especially with Gary’s observations that the HUI will most likely not, possibly never, go under 500 again for years.

    If you’re on the sidelines get the f in!

    Do you know how many are sidelined right now waiting for an upward trend to somehow act irrationally???

    Fundamentals, fundamentals, fundamentals, I swear you can almost feel all the new electronic USD getting throw in the economy daily.

    GLTA, thanks for the encouragement G-Man.

  130. Robert

    Look at a 5-year chart for miners, especially silver miners. Almost all of them are under, significantly, their 5-year highs. HL, SSRI, PAAS, CDE (know I know alot of this has to do with specific company events, but that does not mean they should all be this undervalued).

    The only 2 in my portfolio that are at all time highs are SLW, and FRMSF (this one is crazy, it is relentless, it never has a down day, I guess SLW is the same).

    I am extremely confident HL, SSRI, PAAS, and CDE will approach their 5-year highs in the next 6 months.

  131. Gary

    David,
    I think this phase of the commodity bull will be lead by PM and maybe Ag too. If one wanted to diversify a bit they could buy some DBA.

  132. Robert

    Gary, do you have an estimate on how many USD there are in the system (liquid obviously not asset related)?

    Wondering if 1.5% moved into silver miners what that picture would look like.

    The silver mining world seems terribly small. If you add all their market caps, including SLV, you’re probably looking at only 30-45 billion. That is frickin tiny.

  133. Shalom Bernanke

    Sheesh, my screensaver changes up images from my hard drive every few seconds, and when I see the image on my avatar at full screen size, I just want to smack myself!

    How can that be?

  134. Shalom Bernanke

    As a member of the Council of Foreign Realtions (CFR), and working for one world government, I’m appalled that you folks won’t just have faith and buy paper of all kinds. We must have you be “patriotic”, as the illusion builds upon itself.

    We don’t care about your sovereignty, but encourage you to. We create all sorts of paper for your consumption, so please tangible commodities, especially alternative currencies like the PM’s! 🙂

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