For those that view the $1650 price target by January 2011 as the measure of success or failure, I suggest patience with gold. Anyone that needs to predict both time and price, while using leverage, will likely be frustrated by gold. Gold is one of the most highly controlled markets in the world. This suggests that estimating time and price with extremely small confidence zones can prove to be quite difficult to say the least.
A long time ago, the forecast of $1650 within a time frame was given to reflect the inherent risks embedded within the monetary and financial system. Those risks have certainly come to the surface within the right time frame, but price, consistent with historical management, remains sluggish.
Sluggish, however, can transition to fever-pitch very quickly. History, well beyond the 70's gold model, suggests that all hell can and will break loose with little warning. As I have written many times before,
I suggest that money (largely gold and lesser degree silver) is a game of perception and confidence. This is the main reason why everything can look so normal, right before the wall of confidence comes tumbling down and all hell breaks loose. Martin Armstrong alludes to this rapid progression in his commentary How all systems can collapse overnight.
Source: Money Subject Theory Of Value
Those of you that measure success or failure based a given point forecast have forgotten monetary history. The violence and volatility associated with a sudden change of confidence would certainly introduce much needed 'flexibility' in possible outcomes as of 2010.
While secular bulls end in parabolic (rhino horns or higher order functions) moves, they very often contain more than one. Long, secular bull markets are often characterized by higher order moves or mini-panics that culminate in one major blow off. A run from $1250 to $1650 over the next six to nine months would not be enough to characterize a major blow off top.
One thing is certain, the game or confidence in the monetary 'game', as measured by an increasing angle of ascension in the regression line of the Gold London PM Fixed to Gold ETF ratio, is weakening.
The premiums for physical gold and to a lesser degree silver are expanding.
Gold London PM Fixed to Gold ETF Ratio:
Silver London PM Fixed to Silver ETF Ratio:
Silver, as expected, is leading gold higher, as cost push inflation begins to intensify.
Gold to Silver Ratio:
Silver has poked its head above major consolidation resistance as it appears that a new buyer of physical silver had entered the market last week.
This new buyer, an unidentified German conglomerate, had not previously purchased.
Technical confirmation of a breakout, three days or three percent, will bring in more buyers looking to profit from a supply squeeze.
Paper Silver ETF (SLV)
I suggest the following read.
Dear CIGAs:
Now that expectations for the gold at very significant prices are being offered by various rational sources there is one thing you can be sure. That one thing is $1650. I am getting many emails saying how is it possible for the gold price be at $1650 by early January.
I suspect these are far out in time, out of the money call option buyers that have done exactly what I have warned against. That is the using of options with an investment outlook. Options are speculations that you never hold paste their half but
rather switch to further out, if you believe in what you are doing. Those that pre-offer gold can not trade at $1650 in January because of the short time versus big move clearly have never experienced gold run in late 1979 and early 1980. I will stand with what I have said for so many years.
Gold will trade at $1650 on or before January 14th 2011. That never made me want to buy expensive in time call options. It has given me the courage to invest in gold with no margin to the hilt both in share and bullion wise. There is no doubt in my mind that $1650 and it should occur early 2011. I have told you that Martin Armstrong, a master timer, feels that gold will trade higher and face reaction at Middle to late June of 2011.
The gold banks are throwing blocks to the price as we approach $1262.-This is a major waste of time and money as gold is going to and through the price. The only argument is $1650 in January 2011 or $3000-$5000 in June 2011. Do you have any idea how much money has been made by those that bought gold modestly, and on cash only on every reaction and sold the Rhino Horns. Sounded stupid when I suggest this tactic for the want to be traders. I ran 22,000 long gold contracts in the NY and London markets 1978 to 1980.
Then that was a big number.
Today, if I have a conviction, I simply play with everything I have and screw credit.
The only credit I would use as a pro trader is options. Those of you who follow me closely know that I am NOT kidding. This is the time when PRICE and TIME meet each other. This is the time now as in 1979 that I went throttles to Wall. This is the time now as in the 1979 that I am committing 100% of all the cash I find, collect to what I believe in.
This is the time when all I have planned for is falling into place for the final and enormous pay day. However, I will not and you should not violate discipline, as I have always tried to teach you. Option are never held past 50% of time left when you purchased them.
If I am wrong about gold at $1650 on or before 14/1/11 it only means gold will trade much higher than $1650 five months later. As far as being long and wrong, no!
Respectfully,
Jim
Source: numismaster.com
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