Sell gold | <b>Gold</b> vs. Major Currencies - Mish's Global Economic Trend Analysis |
- <b>Gold</b> vs. Major Currencies - Mish's Global Economic Trend Analysis
- SPDR <b>Gold</b> Trust (ETF) (GLD) news: How Far The <b>Gold Sell</b>-Off <b>...</b>
- <b>Gold</b> Prices 2014: Do What Goldman Does, Not What It Says :: The <b>...</b>
| <b>Gold</b> vs. Major Currencies - Mish's Global Economic Trend Analysis Posted: 15 Apr 2014 11:17 PM PDT Here are some interesting charts from my friend Nick at Sharelynx Gold. (Login Required) Gold vs. US Dollars
Gold vs. Euros
Gold vs. Ukraine Hyyvnia
It took about 4,000 Hyyvnia to buy an ounce of gold at the end of 2008. It takes 17,444 now. Gold vs. Russia Rubles
Gold vs. India Rupees
Gold vs. Yen
By the way: Those in Argentina and Venezuela cannot buy gold at the quoted rates. The charts reflect "official" exchange rates. Black market rates are much much higher. Goldman Sachs and Morgan Stanley Reiterate Sell Signal Bloomberg reports Goldman Stands by $1,050 Gold Target on Outlook for Recovery Least Preferred Commodity? Is gold really the least preferred commodity? Actually, I hope so, because if it is, sentiment will reverse. Please consider Gold Prices 2014: Do What Goldman Does, Not What It Says Gold Doomed or Resting? Seldom is sentiment so bad for something that still appears to be a long-term bull market. When in doubt, it pays to take the opposite side of what Goldman Sachs publicly says. Goldman has a history of not only being wrong, but betting against its own recommendations. Mike "Mish" Shedlock  |
| SPDR <b>Gold</b> Trust (ETF) (GLD) news: How Far The <b>Gold Sell</b>-Off <b>...</b> Posted: 17 Apr 2014 08:25 AM PDT Summary
When I talk to investors and clients about gold, one of my favorite ways to describe it is the following: You either believe or you don't believe. That belief comes in different flavors and denominations, and it's what makes the marketplace so colorful. There's a spectrum of faith, as well. Not all of us go to church every Sunday. Some of us just dabble. And like any other religion, the folks at either pole can be a bit of a challenge to deal with. The best that those of us in the middle can do is admire the passion and conviction while listening with respect. Perhaps most like religion, when you get down to the bottom of it, there's very little mind changing with gold. This is totally cool. There's nothing wrong with this. Plenty of believers and non-believers have made money at various times over the years. The one thing that both camps have in common is that neither really know what's going to happen in the future. What I've tried to do with these articles on gold is step away from the core tenets of each of those belief systems. My goal is to build a fact-based foundation and establish a set of common principles that both camps can agree on. In a lot of ways, all I'm really doing here is acting as the couples therapist; "let's focus on where our feelings overlap and see where that takes us." Understanding the Drivers The first thing we did was take a look at the history of gold and identify the one variable that is responsible for virtually all of its long-term movement: inflation. Specifically, global inflation. Everybody in both camps agrees with this. Gold is a global market, and as something of a "neutral currency" and "store of value", gold's price over time is linked to the value of the currencies in which it is denominated. This is true by definition. Obviously, there are all sorts of short-term psychological- and momentum-based factors at play with gold. The price of gold may go up at the same rate as inflation over the long run (it has to), but during any given year or even during any given decade, prices can be all over the map. This is another point on which everyone can agree. From that foundation, we can go back and start relating the gold price to its historical inflation-based trend. It's a really interesting model and there shouldn't be too much controversy about it. All this does is track the current market price of gold and what the price of gold should be as the currencies in which it is denominated slowly get less valuable over time. (click to enlarge) The orange line is the gold price and the blue price is basically the inverse of the dollar (or a basket of G20 currencies after 1996). You'll notice several remarkable coincidences, the first occurring in 1934 as the price of gold was re-pegged to $35/oz. That was exactly what the price should have been had it simply been allowed to float in accordance with the inflation rate. Then, in the early 1970's as the U.S. began moving away from the gold standard, gold started to trade freely in the marketplace. And once again, remarkably, the valuation almost immediately shot to exactly where it should have been had the gold price simply been allowed to float in accordance with the inflation rate. Gold and an "inverse dollar" met once again, just as one would have expected. Gold is frequently thought of as an inflation hedge, and after the adjustments of 1934 or 1974, and again as recently as 1996 or 2005, gold was a perfect hedge against inflation. Remarkable, isn't it? You can see how beautifully these lines track because technically, they're inseparable from one another. Inflation, the value of a dollar over time, is the chain about which gold's shiny ball, an asset that doesn't really deplete or do much else aside from store wealth, is inextricably and unavoidably linked. In case you were curious, this type of model suggests a fair price for gold of around $812/oz. I realize that's a controversial conclusion. It's just a simple extension of the principals we all initially agreed with, though. I understand that $800/oz feels really far away, but consider we were just there in late 2007. The pre-crisis stock market valuations didn't seem so unreachable. For some reason, gold's pre-crisis valuation seems impossible even to the Gold Atheists. Projecting Future Returns The next thing we did was feed that into a very basic model that attempts to project the future returns of gold. These types of models are not uncommon throughout the industry and over the long-run, the structure tends to work fairly well as long as you understand the fundamental trend driver. Future returns are, by definition, a function of:
Now that we know the trend and how current prices relate to that trend, we can feed all this into our basic model which looks like this: (click to enlarge) It's not perfect and it gets the exact details wrong from time to time. But generally, it's helpful enough. Most importantly, it's really good at picking out the moments when prices get extreme relative to the historical trend. I think that's another thing we can all agree on. We all agree that gold was massively undervalued before the U.S. started relaxing the gold standard in the early 70's. We all agree that gold was way too expensive during the bubble in 1980. And we all agree that gold was massively undervalued again in 2001. Where the Arguments Begin Regardless of where you fall on the gold spectrum of belief, I doubt you'll fight those conclusions and the ability of this type of model to highlight moments of general extremes. The problem is what this model says about 2011. In 2011, this model was suggesting that gold was massively overvalued. Relative to its long-term trend, gold was almost as overvalued in 2011 as it was in 1980. We don't have a full decade of forward returns yet, so it's unclear exactly how bad a point that was at which to establish a long-term gold position or even if it'll be a bad point at all. Nobody in either camp can say for sure. But gold's off to a pretty miserable start since this model suggested that moment of extreme overvaluation. Gold is down nearly 40% in the three years since the peak. Again, anything could happen in the next seven years. Gold may go to $5,000/oz by 2021 and our 10yr forward returns may wind up as positive. Who really knows? Every religion requires a certain degree of faith. The point -- and this is another point everybody will agree on -- is that in order for a major, continued advance to occur, it will be contingent upon future events. Unexpectedly high inflation or a global currency collapse, for example. Some of us are more comfortable forecasting that and investing around that thesis than others. Let's Build Some Strategies Now that we've established our basic model and understand the fundamental drivers, we can develop a handful of simple, slow strategies that are better than buying and holding gold. The first thing we can do is assemble a simple rotational strategy where we're always long gold but slowly get out when it's much too expensive. (More details here.) That strategy looks like this: (click to enlarge) We can improve on that somewhat by matching our holding period to our projection period (10 portfolio buckets with a 10 year window for each) and putting the cash that's not in gold to work in something short term and zero risk like the Fed Funds rate. That looks like this: (click to enlarge) This stupidly-simple approach is vastly superior to buying and holding gold. All it does is slowly get you less long when valuations get extreme and get you more long as valuations improve. There is no debating the results here. This has been a better way to invest in gold. It's better to step aside or invest less during moments of extreme overvalaution. It's better to be more invested when valuations get cheap. If you can spot those moments of extremity you should act accordingly. And like I said, if this type of model can do one thing -- and I actually don't have confidence it can do much else -- it's that it can tell you when gold is extremely overvalued relative to trend. How To Do Even Better For the sake of argument, let's say you disagree with the conclusion that this type of historical-trend model is good at identifying extremes. Or perhaps more rationally, you agree with its earlier conclusions but believe there's something unique and different about 2011 that may suggest a different future outcome. This is OK. Rather than messing around with trying to figure out whether gold is historically expensive or cheap, we can just use a medium-term trend following approach. If gold is above its 12-month moving average, we own it. If it's below, we sit in Bills or Fed Funds cash or if we're, ahem, concerned about inflation, then we can sit in short term TIPS. Here's how that strategy looks: (click to enlarge) Crazy, right? No matter what you believe, a purely mechanical trend-following approach blows our original strategies out of the water. In terms of total return, buy-and-hold-gold is a joke. The only problem with that these days -- and this is a legit criticism, too -- is that while in the past you could move your portfolio to cash or T-Bills and get a fair return, you can't do that anymore. Bernanke took that away from the market. Today: Inflation > Short-Term Yields That kind of environment is very rare in history and it's a theoretically optimal environment for gold. But as the last three years have demonstrated, current valuations do matter and gold is no guarantee to preserve wealth in an environment of negative real yields. Even with short term yields below the inflation rate, you would have been much better off in cash than gold in recent years. I also might submit that after things started breaking down in late 2007, the gold market sniffed this out and knew that we were headed for negative real yields at the short end of the curve. I haven't a clue how to prove such a thing, but this may have been an interesting accelerant for gold in the 2008-2011 years. Eventually valuations got too crazy and the trend, like every trend in every market in history, finally broke and went back the other way. Back to our strategy building, if you don't want to constantly follow gold's current price and moving average, you can be lazy about it. You can split your portfolio in half. Every January, take a look at the current price. If it's above the 12-mo moving average, you buy with that half of the portfolio or stay long. If it's below, you sell. Then in July you do the same thing for the other half. So rather than being ALL IN or ALL OUT at any given moment based on a dynamic moving average, our total portfolio may be 100% long, 50% long, or 0% long at any moment in time. We make a maximum of just two trades per year, so like I said, this is a lazy man's trend-following approach. Here are the results: (click to enlarge) Wow. Our lazy portfolio makes 10.6% per year to gold's 4.8%. And it does it with 15% volatility instead of 19%. You can do this with gold futures. You can do this with ETFs like GLD (GLD) and IAU (IAU). Given the baggage and spreads that coins carry, you probably can't do this with the physical metal, but at least it might give you some insight on when it's a better or worse time to go down to the corner coin shop. Let's Kick It Up A Notch Using a mechanical trend-following approach seems to work fairly well over the long run and so does using an approach where you're mindful of gold's longer-term fair value. Where things start getting interesting is when we blend these approaches. What happens if we use a simple 12-month trend following strategy as our basis and then, if gold is abnormally cheap on a secular basis, we get a little aggressive? When gold gets historically cheap according our very long-term model, the tailwinds of mean reversion start picking up. You can see very clearly from the first chart that mean reversion, arguably, helped power the move in the late 70's and again from 2001 to 2006. If you believe in the power of mean reversion, then you should be more aggressive with gold when it gets extremely undervalued relative to its trend. The easiest way to define this would be to draw a line at a certain forward-return threshold. Projected 10yr returns greater than 5%, let's say. You could be aggressive with gold as long as long as the returns are above that and switch back to a normal weight as the trend approaches fair value again. Since gold tends to move in very long cycles and the nature of our projection -- 10 year expected returns -- is inherently a long one, you would want to give your strategy time to let that play out. We might loosely define that "out point" as a negative projected 10yr rate of return for gold. At that point, we'd turn off our aggressive modifier. Gold would, theoretically, have approached something of a fair value. In this simple model, we can express that aggressiveness as a 1.5x leveraged position. I wouldn't suggest anybody actually execute this strategy in that way, but this will keep results consistent with our earlier strategies. (click to enlarge) Good lord. 12.2% per year with essentially the same long-term volatility as gold. That's crazy. There's some hair-raising drawdowns, of course. But those are par for the course with gold. If you don't like the idea of leverage (and with gold, I sure don't) you could think of having reached an extremely undervalued price as a condition as necessary for a 100% allocation. In other words, that would be the situation you'd need to be fully long gold. Unless the secular valuation was especially favorable, then your max gold position might be something like two-thirds. Also keep in mind that this isn't really a long-term gold strategy for gold. It's fairly active and there's a lot of buying and selling as gold moves above and below its 12-month moving average. I realize that these are gigantic numbers. I'm sure if you started applying all sorts of arbitrary, fundamentally-unrelated signals, you could fit this curve to create even more gigantic numbers. I have no interest in drawing up some backwards-looking strategy to maximize returns. All I want to do is incorporate what we learned in the first two parts of this study (part one and part two) into designing a slight better strategy. We're doing something that makes practical sense and is defensible in theory. The idea is simply to be long gold when the short-term trend is bullish and be aggressive when gold gets extremely undervalued relative to its long-term trend. Even if you had never seen any of the charts above, you might guess that that'd be a fairly sensible and profitable way to approach gold. Strategy Recap This isn't an optimal strategy by any means, but it's easy to execute and one of my rules for any trading strategy is that it has to be simple enough to fit on a 3x5 index card. Strategy #1 For Active Traders
Strategy #2 For Passive Investors
Strategy #3 For Aggressive Investors
These are stupidly simple strategies. They're far from optimal. But they're conceptually sound and don't incorporate any principles you wouldn't have been able to surmise after studying this data 20 or 30 years ago. Folks have been trend-following gold since day one. And while we may not actually buy when there's blood in the streets and valuations are depressed, at least we know we're supposed to. It's not unreasonable to build a strategy based on these basic factors. Conclusion Can you do better than simply buying and holding gold? I don't think there's any question that you can. Whether you do something basic like own more gold when the secular valuation is favorable and less when it's unfavorable, or you use a classic trend following approach, it's easy to do better over the long run. These types of strategies are dramatically superior to simply buying and holding gold. However, I'll concede that this sort of defeats the purpose. The purpose of gold is to own gold! It's about holding this heavy stuff in the palm of your hand and being able to say, in a Jesse Pinkman voice, "Bring on the financial apocalypse!" So, you're right. The one thing these approaches don't necessarily do is guarantee protection from some sort of acute crisis where the Dollar implodes and gold basically goes to $5,000 overnight. A trend-following strategy, even with some cyclical adjustments to it, could theoretically have you out of gold and in short-term paper when that apocalypse hits. (Though wouldn't it be awesome if it had you in and leveraged when that happened?) You can see how much the market is willing to pay for that insurance too. The difference in returns between simply holding gold and using some sort of enhanced gold trading strategy is dramatic. It's $8.9 million vs. $624k over 40 years. Is this a price you are willing to pay? If you subscribe the financial or currency apocalypse that's central to many gold bull theses, you have to be long gold -- the metal, yo -- at ALL TIMES. Because you never know when all the paper currencies in the world are going to drop to zero. I have no interest in pushing against the idea that that'll happen. Neither you nor I can say with any sort of confidence what the future will look like. I simply want to point out the fact that the cost of thinking that it someday might has been substantial over the last few decades. With a fair value target of $812/oz today, the forces of mean reversion are now working against gold. We won't all agree on that price target, of course. Even though, paradoxically, virtually every last one of us will agree on the fundamental premise upon which that conclusion is based. Not all hope is lost, however. These strategies can help us do better no whatever the market throws our way. Disclosure: I am long GLD. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. For additional disclosure, see here: cornicecapital.com/AlpineAdvisor/legal-notice/ |
| <b>Gold</b> Prices 2014: Do What Goldman Does, Not What It Says :: The <b>...</b> Posted: 16 Apr 2014 10:01 AM PDT By: Money_Morning
That might sound contradictory at first, but not when it comes to Goldman. Jeffrey Currie, the investment bank's head of commodities research, has repeated his $1,050 target several times since last October, when he declared gold a "slam-dunk sell" along with other precious metals.
That Goldman has seen fit to repeat its $1,050 so frequently over the past six months smacks of frustration. While gold prices did briefly slip below $1,200 in December, the yellow metal is up about 17% since then. Gold prices were trading at about $1,327 on Monday afternoon - hardly the tumble Currie predicted last fall. Last month, as gold prices were touching their high of $1,382, Currie took the opportunity to remind the world that Goldman was still bearish. "It would require a significant, sustained slowdown in U.S. growth for us to revisit our expectation for lower U.S. gold prices over the next two years," Currie wrote in a research note. Money Morning Resource Specialist Peter Krauth disagrees. From where he sits, the gold selloff pretty much exhausted itself in January. "The largest physical gold ETF, the SPDR Gold Trust (NYSE ARCA: GLD), sold off 42% of its metal between its record high in Dec. 2012 and Jan. 2014, or 564 tons of gold. That selling looks to have bottomed in mid-January and GLD holdings have started to grow again since then - a major trend reversal," Krauth said. While gold prices may not get back to $1,900 an ounce, neither are they likely to slump down to $1,000. Even if gold prices do slip back below $1,200, demand from central banks as well as Asia is likely to keep them from slipping to $1,100 or lower. So why is Goldman so insistent that gold prices are going to drop all the way to $1,050, and why should investors view the bank's forecasts with caution? To answer that, we need to look at Goldman's track record... Goldman and Gold Prices: A Shady History Let's first look at some of Goldman's gold price forecasts over the past few years and how they panned out. For example, back in 2007, Goldman was bearish on gold, telling its clients to sell. In fact, Goldman declared selling gold in 2008 one of its Top 10 tips of the year. Of course, gold prices rose 12.2% in 2008 and another 23.4% in 2009. By November 2011, Goldman was actually bullish on gold prices - it raised its target to $1,930 an ounce about one month after gold prices had peaked. By May 2012, with gold prices below $1,600, Goldman adjusted its bullish target to $1,840 an ounce. Gold prices did rise slightly after that, but never made it to $1,800, and thereafter started a precipitous decline. By December 2012 - when gold prices were trading in the neighborhood of $1,700, Goldman revised its forecast to $1,800. Six months later gold prices were slipping toward $1,200. Goldman finally reversed course in February 2013, beginning its string of bearish forecasts that have continued to the present. That's actually good news for gold prices, as Goldman always seems to be late figuring out where gold is headed. Or is it? Does Goldman Manipulate Gold Prices? It doesn't quite make sense that a top-shelf investment bank like Goldman Sachs would be wrong so often about the direction of gold prices. But when you look at Goldman's own gold investing habits, a suspicious pattern emerges. Goldman is usually buying while it publicly advocates others to sell, and vice versa. It knows many investors will follow its "advice," which in turn helps Goldman to buy gold at lower prices and sell gold at higher prices. Sure enough, as Goldman was declaring gold a sell last year, it was scooping up the yellow metal like crazy. In the second quarter alone it bought 3.7 million shares of the GLD ETF - valued at about $500 million. If you've ever suspected gold prices are being manipulated, you're not alone - and you're right, they are," said Money Morning Chief Investment Strategist Keith Fitz-Gerald. "Bigger firms like JPMorgan, Goldman Sachs, PIMCO, or any of a dozen other behemoths simply release a 'research report' that is interpreted as gospel by the mainstream media and swallowed hook, line, and sinker by millions of unsuspecting investors as a reason to buy or sell." Knowing this is going on is vital for retail investors, not just so they don't get snookered by the Wall Street heavyweights, but so they can adjust their own strategy accordingly. Fitz-Gerald said dollar-cost averaging - buying a set dollar amount of an investment at regular intervals - is one tool people can use to avoid becoming a Wall Street patsy. "Dollar-cost averaging forces you to buy more when the price is low and less when the price is high," Fitz-Gerald said. "Maybe you can't compete with the big banks, but you can beat them at their own game." Do you believe the reports on precious metals and stocks issued by the Big Banks are valid or simply tools to manipulate the markets? Tell us on Twitter ;@moneymorning or Facebook. Source : http://moneymorning.com/2014/04/14/gold-prices-2014-do-what-goldman-does-not-what-it-says/ Money Morning/The Money Map Report ©2014 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company. © 2005-2014 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication. |
David Zeiler writes: Goldman Sachs (NYSE: GS) must really want to buy more gold; this week it repeated yet again its forecast for gold prices in 2014 to drop to $1,050 an ounce.
But investors need to be very skeptical when looking at Goldman's forecasts for gold prices. Not only are they often wrong, but the bank frequently does the opposite of what it recommends.
| You are subscribed to email updates from Sell gold - Google Blog Search To stop receiving these emails, you may unsubscribe now. | Email delivery powered by Google |
| Google Inc., 20 West Kinzie, Chicago IL USA 60610 | |
0 Comment for "Sell gold | Gold vs. Major Currencies - Mish's Global Economic Trend Analysis"