The longer-term trends in gold's supply-demand fundamentals point to a potentially explosive market situation in the years ahead. In short, the supply trend is static to shrinking while global demand trends, particularly from investors and central banks, appear to be in a period of rapid expansion. What's more the political, financial and economic dynamics driving these trends are not likely to undergo any significant reversal anytime soon for reasons explored below. Up until now, gold's secular bull market has been driven by a combination of private and institutional investor demand. Though those two components in the demand picture remain well-defined, it is the arrival of deep-pocket central banks in emerging countries like China, Russia, Saudi Arabia, India, Mexico, Brazil, as well as players yet to be named, that have added a whole new dimension to gold's secular bull market.
Investor demand tends to ebb and flow based on changing views about the economy, financial markets, and the price itself, i.e. whether gold is perceived to be over-bought or over-sold. As a result, investor demand is generally viewed as an inconsistent aspect of the supply-demand tables. Central bank demand is more rooted in longer-term policies having to do with the value and safety of national reserves, and these policies tend to play out over the course of years or even decades. As a result, changes in the way gold is viewed by central banks are likely to have a significant, even profound, long-term effect on the market -- in fact, the consistent nature of central bank demand can be viewed as putting a floor under the price. (In late 2011, for example, when the price dropped from all-time highs in the $1900 per ounce range, the Chinese central bank reportedly purchased a significant amount of physical metal.) That makes 2011 -- when central banks for the first time in decades became net buyers of gold bullion -- an important watershed year for the gold market.
China remains the centerpeice in the contemporary gold market. As both the world's leading producer and consumer of gold, it plays an important role on both sides of the supply-demand equation. It should go without saying that gold owners would be well-served to understand how China views gold. Obviously a favorable "official" attitude toward gold from its top consumer and producer would play a hugely supportive role in the years to come; and a dismissive, or negative attitude would act to its detriment. China's central bank and federal government see gold as a hedge against its holdings of U.S. dollars and other currencies subject to debasement. Any number of individuals, ranging from members of its academia to government policy makers and important functionaries in the central bank itself, have warned against the instability of currency reserves and the importance of establishing a reliable hedge. In fact, the Peoples Bank of China advocates a 4000 tonne gold reserve. It now holds about 1200 tonnes. Such thinking affects the supply side in that China is likely to continue "domesticating" its gold production as part of its national reserves. On the demand side, it makes China a ready buyer of any sizable tranches of gold that become available on the market -- no matter the source. In fact, recent reports have surfaced that China has launched a program of buying gold directly from mining companies around the world as a means to building its reserves. The London Telegraph's Ambrose Evans-Pritchard reports one source, predicting that China will acquire "several thousand tonnes of gold over the next five years to match the US stash of 8,000 and the Euro Zone's 11,000."
The fact that this pro-gold attitude has become ingrained in the "monetary thinking" of China's economic policy makers will figure largely in supply-demand tables in the years to come and will act as a catalyst for similar thinking in other similarly positioned nation-states. Russia, for example, the fifth-leading producing country follows a similar policy; and recently South Africa, the fourth-largest gold producing country, took steps to move away from the dollar and toward China's renminbi, in international currency transactions. How long before it sees fit to follow a gold policy similar to the one in place in China? The three countries together account for 28% of the world's annual gold production.
Central banks becoming net buyers of gold top story for 2011
Now, at the end of the first quarter of 2012, we can look back at the events of 2011 with a little perspective. If I were to rank the most important gold market events of 2011, the profound shift of central banks from net sellers to net buyers would sit comfortably in the number one slot. Number two would be the surge in purchases of coins and bars by private investors. Not only are the shifts in sentiment themselves profound, the tonnage involved is striking. Ten years ago, in 2002, central banks sold 545 tonnes in the aggregate. In 2005, net sales reached a peak of 662 tonnes. Five years later, in 2010 those sales had dwindled to 77 tonnes, and in 2011, the central banks became net buyers of 440 tonnes -- a shift of roughly 1000 tonnes from 2002 to 2011. In other words, not only did central banks move in the direction of gold ownership in 2011, they did so with gusto. Physical availability, more so than price considerations, appears to be the greatest restraint to further official sector acquisitions, as more and more dollars pile up in the reserves of export-driven economies.
As for the private ownership of gold bars and coins, the growth is equally striking. In 2002, investors globally purchased 373 tonnes in the form of coins and bullion. In 2005, after the first gold exchange traded funds were introduced, total combined investment demand for coins, bullion and exchanged traded funds reached 620 tonnes. From there, gold ownership has been in a steady pull upward, hitting 1196 tonnes in 2008 and 1641 tonnes in 2011. It is interesting to note that exchange traded fund demand turned sharply lower from 2009-2011, while the coin and bullion component turned sharply higher, as a number of hedge fund owners - including John Paulson - opted for outright ownership, probably in the form of allocated storage, over the ETFs.
The combination of strong official sector demand and global investment demand could move gold into the next phase of its long-term bull market, and carry prices to new levels beyond the all-time high of $1895 per ounce. The world of money and finance underwent severe changes in the aftermath of the 2008 financial meltdown, and most significant among them is the way gold is viewed as a long-term store of value by private investors, fund managers, sovereign funds and central banks alike.
Gold's bull market surge came during disinflationary times
We should keep in mind that gold's price surge prior to and just after the crisis came when the economy was experiencing disinflationary circumstances -- something that came as a surprise to many analysts. History tells us that there is no gold bull market like one driven by runaway inflation. Now with key central banks in the industrialized world (Europe, the United States, Japan and United Kingdom) moving to quantitative easing monetary policies -- i.e., running the printing presses -- many feel that the next stage in gold's price evolution could occur under inflationary circumstances. If so, it could make the next few years an interesting time for gold owners. As the monetarist school teaches, monetary inflation generally takes a period of three to five years to translate to price inflation. In the United States, the first wave of quantitative easing began in 2009 and ended in mid-2011. Another round, as you are about to read, could be in the offing. (Please see "Quantitative easing and gold" below.)
In the short run, any number of intervening factors can govern the price of gold -- from the activities of rogue traders, bullion banks and central banks, to software-based systems generating thousands of trades in the blink of an eye. In the long run, though, it is the ebb and flow of physical metal -- the activity of its buyers and sellers-- that truly govern the price. The motivation of the real buyer of the physical metal -- as well as the true motivation of its real sellers -- lies at the heart of the future price of gold, and it is here that the true student of the golden metal will look for guidance. Though market magicians can move the market in one direction or the other by manipulating paper instruments, they cannot govern the dynamics of bull or bear markets over the long run. That is why the patient owner of the physical metal itself over all these years has been the most direct beneficiary of this bull market, and it is why he or she is likely to remain the chief beneficiary in the years to come.
USAGOLD Client Interview
USAGOLD: JD, can you give us a quick personal profile?
JD: I was in real estate sales and management and set a goal to retire early and do humanitarian/mission work. I needed to save a certain amount of money to do so and did, and now happily run a mission providing medical assistance to remote areas of Africa. Because of my diminished access to income, by choice, the safety of my asset base is of utmost importance. I came from an upper middle class family, but built my wealth on my own. I am now proud to say that my gold holdings are valued in excess of seven figures, and have been a critical component of my strategy.
Q: Why do you own gold?
A. For safety and as a hedge. I want all my bases covered and am a long-term investor. Stocks are a gamble these days, in my opinion -- at the mercy of computer selling. I hold some cash, some bonds, and obviously gold. If rates go up, I can invest my cash in interest-bearing investments and take advantage of that. If rates go down, I have my gold. I do have some stocks, but not much. As I look at it, when one is up, the other is down, so I stay pretty even, and that's the way I like it.
Q: What do your gold holdings look like in terms of product type, and why did you decide to allocate the way you did?
A: Originally, my holdings were about 75% historic pre-1933 gold coins, and about 25% bullion coins. I chose in my most recent liquidation to sell a portion of my bullion holdings though, so now I'm about 90% pre-1933 and 10% bullion. I like the added safety of pre-1933 ownership against the possibility of government intervention. In the context of my ownership and my desire for safety and protection over the long run, the idea of adding some low-cost protection made sense when I purchased, and it continues to be my preferred form of ownership moving forward.
Q: How long have you been working with USAGOLD?
A: I made my first purchase with you in 2004 and continue to work with you today.
Q: Why did you originally choose USAGOLD as your broker?
A: Believe it or not, I found you online. I felt safe and comfortable with you - no pressure. I started with baby steps on your recommendation. You really undersold me and had me start slowly and took the time to explain things in detail. You spent hours with me up front and even during peaks, spent time with me when you could have been selling to someone on the other line - and at the time, I was still a small client by anybody's standards -- and didn't have a lot of gold.
Q: What do you like most about working with USAGOLD?
A: Your word is good -- BEYOND good. I went to sell recently and sent a some product back to you. After sending, I realized that I would have preferred to liquidate a different product group from my holdings. What I had sent you, and what I subsequently sent, crossed in the mail. At that moment, I had half of my holdings in transit, but never doubted for a moment that everything was just fine. That kind of trust is hard to come by.
Q: What do you think stands out about USAGOLD in comparison to other options in the gold market?
A: In a sentence, you are not sales people. You are in it for the long-term relationship.
Q: Would you recommend USAGOLD to friends and family?
A: No doubt...in fact, I have referred several clients to you that continue to work with your firm today
Q: What do you think the future holds for gold both in the US economy, and for you personally?
A: Mountains and valleys. But I'm in for the long haul. I'm not really in it to make money (even though I have without necessarily trying), but for the safety in such scary times. And even if it goes down, I believe some day it will be up again. Biggest to me is that I have it in my possession versus the latest Bernie Madoff or latest fund that was supposed to be segregated and wasn't (e.g. MF Global). Even the most reputable firms could be questioned, but my gold can't be, and for me, that's as good as it gets.
The tell-tale effects of zero percent interest rates
From Stanford economist, John Taylor, as published in the Wall Street Journal:
"Before the 2008 panic, reserve balances were about $10 billion. By the end of 2011 they were about $1,600 billion. If the Fed had stopped with the emergency responses of the 2008 panic, instead of embarking on QE1 and QE2, reserve balances would now be normal. This large expansion of bank money creates risks. If it is not undone, then the bank money will eventually pour out into the economy, causing inflation. If it is undone too quickly, banks may find it hard to adjust and pull back on loans. . .
The combination of the prolonged zero interest rate and the bloated supply of bank money is potentially lethal. The Fed has effectively replaced the entire interbank money market and large segments of other markets with itself i.e., the Fed determines the interest rate by declaring what it will pay on bank deposits at the Fed without regard for the supply and demand for money. By replacing large decentralized markets with centralized control by a few government officials, the Fed is distorting incentives and interfering with price discovery with unintended consequences throughout the economy."
To this let me add these words from Interest Rate Observer's James Grant delivered in a recent speech at the New York Federal Reserve:
"The economist Hyman Minsky laid down the paradox that stability is itself destabilizing. I say that the pledge of a stable funds rate through the fourth quarter of 2014 is hugely destabilizing. Interest rates are prices. They convey information, or ought to. But the only information conveyed in a manipulated yield curve is what the Fed wants. Opportunists don't have to be told twice how to respond. They buy oil or gold or foreign exchange, not incidentally pushing the price of a gallon of gasoline at the pump to $4 and beyond. Another set of opportunists borrow short and lend long in the credit markets. Not especially caring about the risk of inflation over the long run, this speculative cohort will fund mortgages, junk bonds, Treasurys, what-have-you at zero percent in the short run. The opportunists, a.k.a. the 1 percent, will do fine. But what about the uncomprehending others?"
Zero percent interest rates push investors into risky investments at a time when many would be more comfortable in a savings or yield vehicle. Theoretically, an individual saver could have a million dollars in a bank or money market savings and not receive enough of a return to finance an ordinary life style -- a situation that has undermined a good many retirement plans. Gold has returned 19% or better annualized in eight of the past ten years. In that same speech at the New York Fed, Grant, an advocate of the gold standard, ends with this:
"It's a little rich, my extolling gold to an institution that sits on 216 million troy ounces of the stuff. Valued at $42.222 per ounce, the hoard in your basement is worth $9.1 billion. Incidentally, the official price was quoted in SDRs, $35 to the ounce, now there's a quixotic choice for you. In 2008, when your in-house publication, 'The Key to the Gold Vault' was published, the market value was $194 billion. Today, the market value is $359 billion, which is encouraging only if you personally happen to be long gold bullion. Otherwise, it strikes me as a pretty severe condemnation of modern central banking."
High Frequency Trading and Gold
Something happened on the way to gold breaching the $1800 per ounce mark in late February. Suddenly, and without apparent cause, the bottom fell out of the price. Twelve hours later gold was trading over $100 lower, and market analysts collectively were left scratching their heads. Some blamed central bank intervention. Others blamed short-selling by the central banks' proxies in the bullion banking business. Few saw the plunge as a natural market event or truly believed the real cause was the result of Congressional testimony from Fed chairman Ben Bernanke to be the real cause, as reported by the financial press.
Three weeks later, an under-appreciated report sponsored by the United Nations provided some potential answers. "High-frequency traders," reported Reuters citing a new United Nations study, "have caused U.S. commodity futures prices to disconnect from market fundamentals of supply and demand since the 2008 financial crisis. . .Also known as black-box players, they plug algorithms into computers to generate numerous, lightning-speed automatic trades that are designed to make money from arbitrage on razor-thin price differences and movements. An increasingly high correlation between commodities and equities, caused largely by high-frequency traders, means that prices for oil and other U.S.-traded contracts are more exposed to sudden and sharp corrections."
The article went on to point out that high-frequency trading accounts for over one-half of equity trade volumes and rising share of commodity volumes. "The financialization of commodity markets has an impact on the price determination process," concludes the U.N. report. Nicolas Maystre, who authored the report, say: "These investors (high-frequency traders) don't have a real physical interest in markets, so if markets are now just responding to equity, it creates a destabilizing effect on commodities. ... It can create bubbles." The report did not specifically cover the gold futures markets (it concentrated on sugar, wheat, corn, soybeans, and live cattle from 1996 to 2011), but late February's abnormal plunge exhibited all the signs of high-frequency trading activity.
It would be a bit naive to believe that computerized trading programs would become a factor in all markets except gold. However, gold investors who own the metal outright cannot be forced out of their positions by "sudden and sharp" downside corrections and margin calls, as is the case with the owner of futures, or leverage contracts. As a result, the outright owner of the metal stands a much better chance of weathering the volatility than the owner of gold in the form of a futures contract. Volatility works both ways, and the primary issues for the commodities' investor are timing and staying power. For the gold owner principally interested in asset preservation, the downside volatility, in most instances, amounts to little more than an interesting side show and perhaps even a buying opportunity. Therein lies the difference between the two types of gold owner.
Despite the computer-based onslaught, gold still managed a respectable 6.3% gain for the first quarter of 2012 and one that competes favorably with the highly-trumpeted performance of stocks. The Dow Jones Industrial Average was up 8.1% for the first quarter.
Gold in Five Easy Lessons
1. Don't buy it because you need to make money; buy it because you need to protect the money you already have.
2. Don't look at price as a barrier; look at it as an incentive.
3. Don't buy its paper pretenders; buy the real thing in the form of coins and bullion.
4. Don't fall prey to glitzy TV ads; do your due diligence instead.
5. Don't allow naysayers to divert your interest; allow yourself the right to protect your interests as you see fit.
Catching up on "The Fourth Turning"
Those of you who are long-time readers of my newsletters, articles and books know that I have always had a strong attachment to the William Strauss and Neil Howe's book, "The Fourth Turning." I consider it one of the most important books of our era simply because it described so accurately not only where the nation stood economically and politically at the time (the book was published in 1997), but where it was likely to be heading. "Winter is coming, " they warned. The book was prophetic -- in some instances amazingly so.
Here are a couple of snippets from the book published in 1997:
"The next Fourth Turning is due to begin shortly after the new millennium, midway through the Oh-Oh decade. Around the year 2005, a sudden spark will catalyze a Crisis mood. Remnants of the old social order will disintegrate. Political and economic trust will implode. Real hardship will beset the land, with severe distress that could involve questions of class, race, nation and empire. The very survival of the nation will feel at stake. Sometime before the year 2025, America will pass through a great gate in history, commensurate with the American Revolution, Civil War, and twin emergencies of the Great Depression and World War II."
"At home and abroad, these events will reflect the tearing of the civic fabric at points of extreme vulnerability -- problem areas where, during the Unraveling, America will have neglected, denied, or delayed needed action. Anger at 'mistakes we made' will translate into calls for action, regardless of the heightened public risk. It is unlikely that the catalyst will worsen into a full-fledged catastrophe, since the nation will probably find a way to avert the initial danger and stabilize the situation for a while. Yet even if dire consequences are temporarily averted, America will have entered the Fourth Turning."
Recently, Neil Howe wrote the following at his blog, The Saeculum Decoded:
"So to ask when the current Fourth Turning began is to ask, when was the catalyst?
Pending stunning new developments, I believe the catalyst occurred in 2008. It's a date that is looking better and better as time goes by. The year 2008 marked the onset of the most serious U.S. economic crisis since the Great Depression. It also marked the election of Barrack Obama, which could yet turn out to be a pivotal realignment date in U.S. political history.
Let's look at each of these separately. First, the economy. Yes, the U.S. recession technically started in December of 2007, but neither the public nor the market felt it until the spring and summer of the following year. In fact, if I had to give the catalyst a month, I would say September of 2008. The global Dow was in free fall. Banks were failing. Money markets froze shut. Business owners held their breath. Thankfully, America's leaders succeeded in avoiding a depression by means of a massive liquidity infusion and fiscal stimulus policies whose multi-trillion-dollar magnitude has literally no precedent in history. Today, for the time being, the U.S. economy seems safe again, though to be sure it has emerged weaker and more fragile and certainly more leveraged than it was before."
Quantitative easing and gold
The gold bears got their money’s worth out of the perception that the Fed would not be launching a new round of quantitative easing anytime soon. The first time came at the end of February when Fed chairman Ben Bernanke gave "no indication" of further easing in Congressional testimony. Gold dropped nearly $100 per ounce in a single 24-hour period. The second time came in mid-March when the markets interpreted the just-released Federal Open Market Committee (FOMC) statement to be suggesting that further quantitative easing might be unnecessary. The third time came at the beginning of April when the actual minutes from the March 13 meeting were released. On no less than three different occasions over the past 30 days, gold took a hit on essentially the same news. In each instance, gold recovered only to take another hit when the subsequent announcement was made. As mentioned earlier, computer-based program traders piled on exacerbating the downward momentum. All in all, from the first announcement by Bernanke in late February to the April 4th close, about $160 had been shaved from the price from $1780 to about $1620 per ounce.
Most economists cite low interest rates and the budding economic recovery as the primary motivations for the Federal Reserve’s quantitative easing program, but in my view, any analysis that stops there comes up short. According to the Wall Street Journal, the Federal Reserve purchased 61 percent of the Treasury’s debt issuance in 2011 and, according to Barclays Bank, 91 per cent of its long-dated paper. In other words, quantitative easing, of which the purchase of U.S. Treasury paper is the largest component, is also a major contributor to keeping the U.S. government in business. Thus, any analysis about whether or not another round of quantitative easing is in the offing needs to take into account the financing needs of the federal government.
The last round of quantitative easing ended June 30, 2011 and since then the Federal Reserve has not added much in the way of new U.S. Treasury paper to its balance sheet. Operation Twist is more of a shuffling act than anything else -- exchanging short-dated paper for long -- but it does not do much in the way of addressing the record revenue shortfalls the federal government is experiencing. When you consider that the federal government covers over 40% of its deficit in the debt market and that its major foreign creditors have by and large gone to the sidelines, it follows that we may be coming to a tipping point with respect to further quantitative easing.
Fox News CheatSheet reporter, Eric McWhinnie, says that “with commodity prices at elevated levels, central banks are simply in a holding pattern, and must talk down prices before any more easing is officially announced.” The Federal Reserve Open Market Committee has meetings scheduled in April and June, and we would not be surprised if there were not at the very least a “clarification” issued at one of those two meeting on the possibility of further easing. In the absence of a new round of quantitative easing, the Fed would most likely find itself dealing with rising interest rates, a stronger dollar and a falling stock market -- three outcomes it would just as soon avoid.
What others are saying
"Contrary to the stereotypical view, gold isn't about Armageddon at all. Gold is simply about storing wealth in a far more efficient manner than with paper cash. Moreover, monetary fundamentals suggest we are capturing an epic turn in asset classes that could be as positive for metals as the early 1980's proved to be for stocks and bonds."
Drew Mason, St. Joseph Partners
"It takes a large dose of humility to realize that all the value in the world can't necessarily predict timing for when that value will be manifest. What we're doing is playing a rope-a-dope, like Ali did to Frazier, and when they throw a punch at the precious metals market, we take the punch and we buy some more. We increase our weighting even further. Eventually they will be punched out and there will be nothing but value and that's when you will see the market turn. If less than 1% of the broad market of investment capital is invested in precious metals today, it probably won't take much to see that number rise to between 5% and 10%. In that case, the magnitude of change will be quite parabolic."
Paul Brodsky, QB Asset Management
"There will come a day then the bullion super-cycle finally sputters out. My guess is that it will come once Europe's monetary system has returned to a viable footing -- either by real fiscal union or by breakup -- and once China's renminbi becomes fully convertible and takes its place as the third pillar of the world's currency system. We are not there yet."
Ambrose Evans-Pritchard, The London Telegraph
"If one understands the possibility that all digital credits in your bank and investment accounts could disappear given the failure of a major global bank (an inevitable event, it seems right now), then one should clearly understand that owning physical gold and physical silver is not an option but a necessity if you are to survive the second phase of this global monetary crisis. Even if we are wrong about the failure of digital financial products and fraudulent paper derivatives in the future, we will still be right, as owning physical gold and physical silver will continue to protect the purchasing power of money as this monetary crisis deepens."
J.S. Kim, SmartKnowledgeU
"It makes me ill how callously people talk about ripping their clients off. Over the last 12 months I have seen five different managing directors refer to their own clients as 'muppets,' sometimes over internal e-mail. . . I don't know of any illegal behavior, but will people push the envelope and pitch lucrative and complicated products to clients even if they are not the simplest investments or the ones most directly aligned with the client's goals? Absolutely. Every day, in fact. It astounds me how little senior management gets a basic truth: If clients don't trust you they will eventually stop doing business with you. It doesn't matter how smart you are. . . Now project 10 years into the future: You don't have to be a rocket scientist to figure out that the junior analyst sitting quietly in the corner of the room hearing about 'muppets,' 'ripping eyeballs out' and 'getting paid' doesn't exactly turn into a model citizen."
Greg Smith, former Goldman Sachs investment banker to New York Times
"As for gold, I have a long-term position in the yellow metal that I will probably never exit or sell. My thinking is that sooner or later we will be subject to a major correction (bear market) that will wipe out or correct 60 years of inflation and leveraging. When that happens, I want to own the only kind of money that the Fed can't destroy. When the big deflation and deleveraging arrives, I see the Fed trying to halt it with QE3 and QE4 and QE5. Why do I say that? Because that's the way the Fed thinks, and that's what the Fed does. They did it in 2007 and 2008, and we know that the current Fed head will not tolerate contraction, and has a record to prove it."
Richard Russell, Dow Theory Letters
"I see gold as power and once again they have given it away to the Eastern Hemisphere. The Chinese continue to laugh. As much as the Chinese would like to have a cheap gold price and have this manipulation keep going, they also want to bring the renminbi to the center stage. To them, it's more important the Chinese currency becomes the world's currency. The dollar, despite the latest rally, is dying, we all know it's dying. So, the Chinese are moving to become the international currency of the world and the best way to do that is through gold. It's a very clever tactic. Every time more gold arrives in China, the more their currency is backed, the closer they move technically to becoming the world's reserve currency."
Anonymous London gold trader as quoted at King World News
"There is a long tradition, in China's imperial dynasties, of hoarding vast quantities of gold. According to an article in the May 1942 issue of The Journal of Economic History by Homer Dubs, a scholar at Duke University, the treasury of Emperor Wang Mang held roughly 5 million ounces of gold around A.D. 23. For comparative purposes, Dubs estimated that the ancient Persian empire controlled barely 1% as much gold and that the Roman imperial treasury at its peak had amassed only about 8% as much gold as the ancient Chinese did. . .Thus, the ancient Chinese imperial treasury may have held one of history's greatest single concentrations of gold in one place. So there is ample precedent for the hoarding of gold by a Chinese government. . .[T]he Chinese aren't the newest big player in this market. They're the oldest. One warning note: Wang Mang ended up controlling so much gold, noted Dubs, by forbidding his empire's citizens from owning it. In the year 6 A.D., the emperor essentially nationalized the ownership of gold, confiscating it for the exclusive use of the government â€“ much as Franklin Delano Roosevelt did in the U.S. in 1933."
Jason Zweig, China Real Time Report, Wall Street Journal
"Some people call me a chartie, but that is really a linear description. I use charts all the time and in fact they are my guide. But I am also a real money and [more] honest systems proponent. The chart of this monetary barometer [gold] tells me that anyone claiming the bull market is over is reading what they want to read into the situation. That is because there is no technical evidence of that. In fact, that looks more like a bullish pattern shaping up and the target is 2050. When the pattern breaks down I'll come out here and admit how wrong I was. But not until the chart says so. Aside from the nominal price of gold and with respect to the big macro economic picture and the gold mining industry's investment case (such as it is), it is gold's price in relation to other assets that is important. And some signals may be cropping up there. After all, gold has been getting 'fixed' for months now. The unhealthy holders are gone and players are aligned in their traditional roles."
Gary Tanashian, Technical Analysts, Forex Pros