Wednesday, November 11, 2009

Super Gold Hype

Ambrose Evans-Pritchard at the writes a very bullish article on gold with the headline writers adding: Barrick shuts hedge book as world gold supply runs out

Barrick gold announced in September that it was closing out its gold hedge positions, and its been pretty much clear since the end of October that they have completed such.

No need for blaring headlines on stale news. As for peak gold, that story has been around for years. Thus, Evans-Pritchards reporting is not covering new territory, when he writes:

Aaron Regent, president of the Canadian gold giant, said that global output has been falling by roughly 1m ounces a year since the start of the decade. Total mine supply has dropped by 10pc as ore quality erodes, implying that the roaring bull market of the last eight years may have further to run.

"There is a strong case to be made that we are already at 'peak gold'," he told The Daily Telegraph at the RBC's annual gold conference in London.

"Production peaked around 2000 and it has been in decline ever since, and we forecast that decline to continue. It is increasingly difficult to find ore," he said.
These are the kinds of stories you get at speculative blow-off tops. Although I am long term bullish, on a short-term basis my thinking is pretty much in line with that of Marc Faber:

Marc Faber the Swiss fund manager and Gloom Boom & Doom editor said he has some short-term concerns about commodity prices including gold. He is also reluctant to invest in bonds...

He believes the latest GPP growth figures are a result of massive government interventions into the free market which inevitably resulted in extremely volatile economic and financial conditions.

As a result assets are over-stretched: equities are too high, the euro is over-bought the dollar is over-sold. Even gold may be due for a short term correction, he says.

"I should also mention some concerns (for now of short-term nature) I have about commodity prices including gold. A large number of commodities including oil, the CRB Index, and gold broke out on the upside in early October," Faber said....Faber has been reiterating, in various recent interviews, the notion of over-streched assets and a possible short-term dollar turnaround.

Speaking in a Bloomberg interview from Istanbul on Tuesday, Faber said: "Maybe the dollar has made a turn, it can easily rebound by 10%”.

“It may have started already since the asset markets started to go down 10 days ago.”

“I don’t think that the dollar will be a strong currency, but you can have periods like in 2008 that the liquidity tightens”.

“If you have the private sector withdrawing credit and the government throwing credit at the system you can get a lot of volatility,” Faber said, adding he would be careful to buy equities now as “we are in a correction period.”
This isn't a time to be liquidating long term gold positions, but if you are a trader, is no time to be long gold. When gold does correct downward, it is going to be fast and furious.

No comments:

Post a Comment