Wednesday, June 1, 2011

Last Post - Goodbye

As I explained in the previous post, I'm wrapping up this blog because my schedule's gone awry. For the last week or so, other committments have gotten in the way: it's getting to the point where I won't be reliable enough to keep to what I've been doing. So, I'm bowing out and pursuing more free-form work.

Instead of the usual wrap-up, this post is going to explain where I got the material for this blog. If you still want to read the material I posted, you'll see how you can track it down yourself.

My description of gold's movement comes directly from this Kitco live chart of spot gold. The same-day action of gold is shown by the green line, the previous trading day's action is depicted by the red line, and the day prior's is shown by the blue line. Below the main graph is another one that shows the movement of gold during a regular trading session: it's entitled "New York Spot Gold." Starting at 8 AM ET, it covers: the action just before the pit session starts, the pit session itself (8:20 AM to 1:30 PM) and the electronic-trading hitch that takes over when the pit session closes (1:30 PM - 5:15 PM). There's a forty-five minute hiatus between 5:15 and 6:00, which I used as the border between regular trading and overnight trading.

The Kitco home page has a smaller chart on the right-hand side, and the day's low and high on the left side opposite. In the centre, below the ads and the link to the Kitco Gold Index page, is a list of news reports. There's usually one that gives a wrap-up on gold trading from Bloomberg or Reuters.

I got the Kitco Gold Index data from this page. At the top is the change in gold since the last trading day, split into two categories: change due to movement in the U.S. dollar, and change due to normal trading. If the latter's on the plus side, it's tagged as due to "predominant buyers;" if negative, it's attributed to "predominant sellers." Below it are breakdowns for other commodities.

For silver, I used another Kitco live chart. The one from Kitco Silver duplicates the gold chart. Crude oil, I got from LiveCharts. Its chart uses Greenwich Mean Time, which requires an adjustment get to Eastern time. Since it's now Daylight Savings Time, four hours have to be subtracted to get Eastern time; when Daylight Savings is over, five hours have to be subtracted. For Pacific time, you need to subtract seven or eight hours respectively. In order to get a day's range of trading, you have to run the mouse over the chart and click "Options." Changing the second menu to "10 - min" and the third to "100 units" gives more than twelve hours' action.

For the U.S. Dollar Index, I used a live chart from Global View. This one also requires setting; its default is the Euro in terms of U.S. dollars. Following the instructions just above the chart will get the Index graphed. To get interday action, you have to find the "Time Scale & Period" menu at the top of the chart - it's in the centre of the seven choices - and choose "5 minutes -> 12 hours" or "5 minutes -> 1 day" to get the readings I used. It's a little inconvenient, but the chart itself is very detailed.

I got the reports that I excerpted, plus the other stories I blogged during the morning, from a Google news search. There's usually one or two wrapups on the first page, although the Wall Street Journal pre-regular-trading report sometimes took clicking through the first few pages. Searching further will also call up items that I found interesting enough to blog.

Finally: I got the six-month chart from Stockcharts. Below the "Currently Trending On Stockcharts" cloud, there's another cloud for "Consistently Popular" charts. Clicking on "$gold" will call up the gold chart, and clicking "$usd" will call up the U.S. Dollar Index. The choices are arranged alphabetically.


As I said last night, I really regret having to give up this blog. Gold's long-term bull market is intact, and it hasn't turned into a mania as of yet. But, a bull market of its length and strength will end in a mania. The bubble phase may take a few years to get rolling, but I'm sure it will. Also consistent with a mania is a general inability to recognize when the tide's turned. The event that pushes gold from bull to bear will be widely scoffed at, and few people will see its significance at the time.

The best way to cope is to divide up your holdings into core and non-core. Core holdings, of physical, are what you have no intention of selling. Non-core are investment and speculative funds. Once gold gets to the point where it can't go anywhere but up, where it breaks the usual rules to widespead cheering, it would be prudent to take enough profits to get your original stake back. This practice is known as reducing your cost basis to zero or negative. Once you're playing with house money, riding the bubble is less risky. As a matter of prudence, it's best to not use margin at all. That way, you can only lose what you put in. Abjuring margin and banking your original stake means that you can salvage a profit even if the bubble blows up in your face.

Unfortunately, when a mania is rolling, acting prudent seems cowardly or wasteful. There's easy money to be made! Like a maniac shifting from a sixteen-hour day to twenty, there's the strong temptation to keep doubling down so as to squeeze as much as you can out of the bubble. It's most tempting for those who have been in gold for some time, as the earlier profits were hard to earn. Sticking to prudence requires being stubborn in a good way. Trust me: it feels like stubbornness, or cowardice or laziness, when everyone seems to be making big money but you.

Doubling down means the entire portfolio is blown away when the bubble cracks. Because we're creatures of habit, we can't shift on a dime when easy money turns into panicky losses. The worst kind of bubbles have false endings, where they seem to crack but revive and roar on. The tech sector saw a false ending in early 1998, which proved to be the prelude to the real ending in early 2000. The 'easy money' was made in the last two years. A false ending is particularly treacherous because, once the bubble revives, the people who did bug out begin kicking themselves for doing so and get back in. When the real ending hits, they hang on 'til the bitter end under the fatal misapprehension that it's another false ending. And, of course, hewing to prudence as a rule feels more and more like mere truculence as the bubble waxes.

It's going to be a wild ride, but it's the 'stubborn' that will make out all right. Take care.

In closing: thanks once again for reading what I've got here. Gold is a fascinating metal, and I hope I've added something to goldbug culture.

Tuesday, May 31, 2011

Gold Has Dither Day, Closes With Mild Loss

After bumping up against $1,540 in overnight trading, gold settled back into the high 1530s but slipped below $1,535 in the morning. Losing its footing, the metal spent almost all of the afternoon in the low 1530s. Unlike silver, which managed to hold on to a decent gain, and unlike WTI crude oil, which made a run at $103 and closed with close to a 3% gain from its $100 starting point, gold ended the day with a loss. About half of that loss erased the trickle-trade gain yesterday, but the metal still ended up below last Friday's close.

Today was one of those days when the first half hour of regular trading foreshadowed the rest of the day. The first time gold fell below $1,535 today, other than a blip, was at 8:30 AM ET when it slid to $1,533. Picking itself up afterwards, it first bumped against $1,535 and then jumped up to $1,538. Then followed some climbing and sliding, which became more volatile until the metal touched $1,540 again in late morning.

Afeterwards, it tired out and slid back down to $1,533 in light trading. Having reached that level right after noon, it stayed in the low 1530s except for brief blips as it lumbered to the close. Trading became lighter and lighter as the end of the day approached. At the close, the spot price was $1,534.30 for a loss of $4.80 on the day. The Kitco Gold Index attributed -$11.90 to predominant selling and +$7.10 to a weakening of the greenback.

Gold's six-month chart, from, shows its small loss coming on the heels of last Friday's much larger gain:

Since doesn't include the data that came from the miniscule trading yesterday, today's decline follows on the heels of Friday's trading. Despite several tries, the metal has been unsuccessful at getting above the $1,540 resistance level. Even though the greenback has sunk quite a bit since its peak, its fall has been able to push gold only so high. When $1,540 approaches, there are too few buyers to fend off the sellers. Despite that block, gold's in a fairly good position as June approaches. Although May of last year was better - back then, the metal managed to recover almost all of an earlier plummet - this May has seen a decent recovery after the rout at the beginning of the month. Seasonally, there is a risk of further drops in the summer: gold's mid-year low last year was in mid-July. For the patient, there's likely to be a bargain during the dog days of summer. Until then, gold may disappoint despite its fine showing this month.

As for the U.S. Dollar Index, it stayed in a range it carved out just before regular trading started. The bottom of the range was 74.5. The top was extended slightly just before noon, when gold slid to the low 1530s, to 74.69. Since the earlier top was only slightly below that new high, the Index essentially stayed in its range for the entire day. As the afternoon wore on, it eased downwards to 74.6 and started fluctuating around that level. When 5:15 came, it was torpid at 74.595.

Its own six-month chart, also from, shows how much has been taken off its earlier countertrend climb:

As of now, the Index has retraced close to half of its earlier run-up. Its Moving Average Convergence-Divergence lines, found at the top of its chart, have made a bearish cross. Its Realtive Strength Index, found at the top of its chart, is now well below neutral. It has definitely made a technical breakdown, as seen by its descent to well below the old 75 support level. However, it might turn around yet although not to a high higher than its 76.5ish peak. It might haul up to the 75s again: today's candlestick makes for a gap relative to last Friday's, and those gaps tend to be filled. For a downward gap, that means a rebound.

Although headwind season is here, gold is still making out all right. It should have some troubles in the summer, but its long-term bull market is still intact. Should the seasonality hold, the metal will forge ahead to new highs in the fall. If next fall sees a run like last fall's, $1,600 will yield and $1,700 might. I really don't know how high gold will go, as easy money and global inflation are still very much with us. I can only warn: once the turning point comes, once the long-term bull turns into a bear, few people will see it at the time. Gold is not in a mania phase yet, contrary to my expectations, but it's getting there. I have little doubt that it will enter one before this bull market ends. Should gold go crazy, the best advice I have is to sell down to the point where you're playing with house money except for your core holdings. Get your cost basis to zero or below, in other words.

That advice pertains to some indefinite point in the future. For now, despite any seasonal headwinds, the long-term direction for gold is up.


You may have noticed that my postings have become more irregular recently. That's because I've had personal committments that are clashing with the time slot in which I write for this blog. Accordingly, but with regrets, I'm folding the tent up because I can't assure anymore that I'll be able to post in a timely manner.

There'll be one more post after this one explaining where I got my items from, which will be up by early tomorrow morning. It'll be for anyone who'd like to keep up for themselves. I really regret giving this blog up, but it's time for me to head to a different pasture - one with a more flexible schedule. Thanks so much for reading what I've posted; those thanks are given especially to any regulars. I got into blogging about gold because I thought I'd be blogging though a blooming mania, which has not come to pass. My underlying motive was to warn everyone when I thought the bubble was about to burst. Right now, there's no need to. Gold will continue to fluctuate, but there's no mania as of yet. I still might write such a piece when gold does go manic, but that could be years away.

Again, thank you and take care. May the gains rain softly on your portfolio.

Consumer Confidence Falls In May

The May reading for the Conference Board's Consumer Confidence Index dropped to 60.8 from April's revised 66.0. That drop confounded expectations for a rise to 67.5. Hardest hit was the future-expectations index, which dropped eight points; the present-situation index hardly budged. This reading conflicts with the Consumer Sentimant Index, which showed a rise for May.

Gold didn't react much to this number, although it did get a short-lived boost from the pessimistic Case-Shiller index released at 9:15. The metal stayed in the high 1530s, despite a poke at $1,540, until the early afternoon when it slumped down to $1,532.

Case-Shiller Index Has Housing In Double Dip

The March reading of home prices by the Case-Shiller index has the average sinking below its April 2009 low, implying that housing is in a double-digit recession.
“Home prices continue on their downward spiral with no relief in sight,” said David Blitzer, chairman of the index committee at Standard & Poor’s. Read the full S&P release.

Housing has been plagued by issues that have created a Gordian knot for the sector.

On the supply side, an oversupply of distressed properties is pushing prices down. There are also worries of a so-called shadow inventory of homes that sellers and banks want to list but have not, waiting for a more favorable environment.

On the demand side, many consumers are still having difficulty qualifying for mortgages, even though rates are low.

There may be hope for the housing market from an unexpected source. If you've spent some time poking around the real-estate market, you've undoubtely read, heard about or even seen the new white elephants. Unlike during the 1930s, these are not mansions with huge carrying costs. They're regular homes that have been in foreclosure for years, and/or are in gutted neighbourhoods. Some are offered at a near-home price, but some are offered at nominal amounts. There were lots of houses in Detriot that could be bought outright on a credit card. The trouble is, they're money pits.

That's not just because they take a whole lot of dough to fix up due to being gutted, vandalized and-or rotted. In some shifty neighbourhoods, which are housing-destitute, they're occupied by rough characters who are squatting. I've read one person relating a tale about fixing up a house for resale only to find that the new furniture and fixings were stolen, just like the old ones were.

Even if thieves don't take advantage of improvements, a lot of those houses are little more than tear-downs now. They're formally counted as inventory, but as time goes by and damage increases they become more unsalable. A tear-down might as well be raw land.

That, believe it or not, is a salvation for residential real etate: time, wreckage and rot turning shadow inventory into unsaleable imaginary inventory - now kept on the books because the banks are afraid to write them off. There's already a substantial differential between new and used homes, and the former are moving. Word had gotten out that a used house is becoming like the used car of old legend. Once the wrecks are written off, inventory will necessarily shrink.

Plague Of Fake Gold In Melbourne, Australia

Fake-jewelry scammers are starting to get sophisticated. According to the man who got scammed in Melbourne, the fake gold looks like it's coming from China.
National Council of Jewellery Valuers (NCJV) Melbourne president Rikki McAndrew, who operates a gold trading business, discovered the ‘fake’ gold pieces when his customers unwittingly tried to sell them to him.

“Most of them were blocks of tungsten and silver coated quite thickly in gold. Just last Friday someone came in with a chain that was stamped 14ct gold but turned out to be copper nickel,” McAndrew said.

“I believe someone is making gold bracelets and watch chains that are in actual fact gold on copper. I’ve came across a lot of them that are stamped 9ct gold but just feel wrong,” he added....

“I would guess China because of the style – the clasp is a very Chinese clasp,” he said.

McAndrew said it would be near impossible for retailers and consumers to ascertain if pieces they bought were fake or real. One of the pieces he had discovered was slightly rough but had the right weight.

“That piece was particularly convincing and probably the best [fake] I have ever seen,” he said.
McAndrew believes that fake jewelry is being sold on eBay. Word to the wise.

Fake gold bars in Vietnam- partially filled with tungsten - seem to have come from Hong Kong. Although it isn't confined to the Chinese area, two cases make for a pattern. Caveat emptor.

U.S. Debt Woes, Though In Background, Still Lurking

That's why Michael Power, Investec investment strategist, believes gold will continue going up. The more immediate if underacknowledged influence is macroeconomic data from Asian countries. With respect to mainland China, the current tightening may reverse if it takes too big a bite out of economic growth.
"We are beginning to see them really become very big players and the more people focus on what's happening in the west to the detriment of not really focusing on what's happening in the east, the less they're likely to get the overall picture right."

That said, there is reason to be concerned not just about what is going on in Europe but, also the developing situation in the US.

According to Power, the biggest question in the global economy at the moment, albeit not the most immediate one is what is likely to happen to U.S. debt.

He says, "Someone this morning likened it to a Charlie Chaplinesque cartoon where you see a guy tied to a railway track and the engine is coming from afar and you can hear it coming and they're lying on the track looking at you and saying help me get out of this. I don't think that the Americans have quite realised yet that the debt train is coming and its big and at some point they're going to need something to do about it."
Needless to say, he's skeptical about the chances of any budget discipline coming down the pipe. He's of the opinion that U.S. legislators are still in denial.

Fake Gold Creating Concern In Vietnam Gold Market

Recently, some goldsmith shops in Vietnam got a solicitation to buy bars coming from Hong Kong. Instead of being pure gold, they were about 60-75% gold with the remainder being a fine powder that examiners suspect is wolframite (tungsten.)
The information has immediate caused big worries among Vietnamese people, who have the habit of keeping gold as their assets in the context of high inflation, but they do not know for sure if the gold in their coffers are real gold or imitation gold. The problem is that the imitation gold cannot be discovered with modern machines....

The information about imitation gold has immediately made the domestic bullion gold market “fall into a crisis” as said by Nguyen Minh Chau, General Director of Bao Tin Minh Chau Gold, Silver and Gemstone Company.

“The bullion gold trade turnover of goldsmith companies has decreased by 50 percent. Especially, many companies have seen the turnover drop by 60-70 percent and they are at the risk of having shut down business,” Chau said.

He went on to say that the gold business has fallen into crisis because of the people’s psychology.

Oddly, the news story that reports on this disturbing development tries to put a happy face on the discovery and subsequent buying strike by saying it will help bring down inflation! The author, or a government censor, holds the unusual idea that a rise in gold causes inflation rather than revealing inflation. It's as if they believed that a rise in the mercury in a thermometer caused the weather to get hotter.

Regarding the tungsten: the crooks behind that scam are dangerously sophisticated. A normal con artist would plate gold over tungsten in order to maximize the theft, short-term. That kind of fraud can be detected with a touchstone.

Unfortunately, hollowing out only the centre and stuffing tungsten inside is much harder to detect. With that kind of sophisticated scam, the only recourses might be either sawing the bar open and/or melting it. Tungsten's melting point is much higher than gold's.

As a result of such scams, assaying costs to confirm good delivery on bars might well shoot up. Fortunately, there are other techniques available - looking for: soldered bars, bars that are mocked up to look like standard bars but aren't, bars with irregularities that indicate being sawed open and remelted. Sad to say, if the tungsten scam spreads it'll be harder to sell non-standard bars.

The remedy might be buying legal-tender bullion coins instead of high-weight bars. They're hard to counterfeit, and government mints may co-operate by making them even harder to fake. Bar smelters could help out too, by lining their bars with hard-to-duplicate riffings along the edges - something like the ribbing on coins. If such comes to pass, sad to say, the newer bars will go for a premium relative to older and less secure bars.