Gold and commodities

D

dotslashfuture

I admit to being a little bit of a gold bug, because i am very cynical about how our financial system has been operating for the past few years. But, I think all the long term fundamentals are lining up in favor of long term bull markets in gold, the metals, and maybe the ags. I don't know squat about the ags, but i can look at the economic numbers and the charts.

But, the thing that gets me excited is gold longer term. I think that gold alternates between being perceived as any other commodity like steel, and being perceived as an actual substitute for holding paper assets. When people start to lose confidence in paper assets, including cash, they start to buy gold. Currency crisis and wars accelerate this process. I think there is the very real possibility of a 1970's style bull market in gold. This opinion is primarily based upon fundamental economic and financial trends, and the current efforts by the fed to re-inflate the economy. But recently, there have been technical reasons to get into gold also. The only person out there who really seems to disagree is Robert Prechter of Elliot Wave fame, and he is looking for a deflationary depression like the 30's.

Anybody out there that has any opinions about gold or the commodity markets over the next few years please post them here.
 
i think they energy sector is an interesting one. all the issues in the middle east, venezuela, and even the states and europe, it is paramount that we become self sufficient with not just refined products, but non-refinery as well. if and when some of our options for energy are closed off or eliminated it will be interesting to see who steps up to the plate. the possibility of geography arbitrage between different north american regions could reach the price volatility as those in california for power a year ago. needless to say, energy derivative desks will be coming up with interesting financial structured swap deals in the future.
 
I look at the futures every day and, to make a long story short, they look like crap.

Metals are in the toilet.

Crude is riding high but mainly because of the war premium, natgas spiking recently but coming off a hard fall and natgas is psycho anyway. If we take out Saddam crude would probably fall five or six bucks overnight.

Grains are trading near recent highs but in a relative sense they look terrible. We've recently had the worst drought conditions and some of the most bullish crop estimates in years and yet the grains can't hold onto their grains.

Euro and USD are basically in a mexican standoff, not a lot of meaningful action there as of late. Most of the volatility in FX futures comes in the form of overnight gaps these days, I feel sorry for the guys still in those pits.

SO overall I think we are looking at a deflationary scenario that will probably only reverse itself when the government sits up and takes action. We have massive loads of debt to work off and banks are badly bruised, this creates a slowdown/deflationary type environment as the money supply contracts and commodities are confirming that. The systemic crisis scenario would be for consumers to completely drop the ball on their gargantuan debtload and start a chain reaction of vicious mortage defaults and plummeting housing prices.

A little less scary and little more likely possibility is that the economy will limp along, not at death's door but still hampered by the massive overhang of debt we have to deal with. If I had to pick a scenario it would be a choppy bear market that is as much sideways as bear as the economy walks a long and painful road. There will ultimately be a VERY nasty confrontation but the time frame is unclear, could be soon or years away.

The bright side of the coin for gold bugs is that gold can still do well in a deflationary environment under the right circumstances. This depends on government action- if governments decide they want to go turbo keynesian and reflate the economy back to health, fiat currencies will go into rapid deterioration as a result and the metals will benefit as a 'third option'. BUT the markets have to believe in that thesis and see it taking hold in a significant way before metals will go anywhere substantial. Betting against the system always requires extraordinary circumstances to win.

So the yellow may rise again, but with the current deflationary bias it may be a while yet- and it may not happen for years if the gubmint can work enough slight of hand to postpone the reckoning for another cycle. I'd suggest watching the USD closely as well as gold, and let the broader technicals tell you when to pull the trigger, unless you want to risk being tied up in a dead money investment.
 
Thanks darkhorse for your comments, especially about how gold can come back even without high inflation.


Here is an article about Soros, about halfway through there is a mention of the dollar topping out and at the bottom there is a mention of the U.S. real estate bubble.

http://moneycentral.msn.com/content/CNBCTV/Articles/TVReports/P30252.asp

i'm looking at these factors:

1. topping of the dollar vs. other currencies

2. CRB index keeps cranking

3. Corporate securities, including bonds, are suffering a crisis of
confidence that doesn't seem about to end.

5. High potential for more terrorism and war.

6. Higher investment demand for gold around the world, as in Japan, south america, and the middle east.

7. The possibility of a massive short squeeze in gold due to the long term practice of gold leasing by the central banks combined with some complicated derivatives problems. I have heard estimates that the current short positions in gold are equal to 4 years of global output.
 
I know that gold stocks move in tandem (roughly) with the spot gold price. Also it is possible to buy physical gold from a gold dealer. But how can one buy spot gold? Is it an exchange-based instrument or traded over-the-counter? What brokers allow the trading of spot gold / gold futures?
 
Welp, I'm real casual in this area. Cafe LeMetropole has a lot to say about gold, especially about a 'cabal' who work relentlessly to keep gold prices near 300. They claim everyone is major short.

I did notice a press release yesterday by someone, Barrick, I think, about how they intend to really ramp up production. So it does seem that at they are trying to hold the price down.

Obviously, if this is true, gold will eventually take off like a rocket. But I don't know how true it is. It took real manipulation to make the silver market rock. I know, gold is <i>not</i> silver...
 
What are the ways to play a Gold bull market, besides individual stocks, the COMEX contract and the physical ? Is there an ETF for the gold mining stocks? What about the minis, are they tradable ?

Anybody (day)trading emiNY crude oil?
 
Ive been putting my spare cash in gold for awhile now so you know what my opinion is. Zeal thinks its possible for gold to hit $5000 an ounce someday. lol.
 
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