About Me

Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!

Friday, January 27, 2012

Gold Price

By my indicators, the recovery in the gold price this year to date primarily reflects upturns in
the various cyclical pressure gauges or "boom / bust" measures. The monetary measures I follow
in connection with gold have been flat so far in 2012. So the betting for gold currently favors an
expectation for improved commercial demand.

As expected, the gold price did bounce off the oversold condition described late last year. It
did not test support at 1500, but has instead maintained a strong positive trajectory which led
the price to break out of the sharp downtrend line in force over the Sep. - Dec. 2011 period.
That is a positive technical development. The metal is overbought in the short term but not looking
out several months. $Gold

The speculative demand for gold continues to rise when I measure its price against the economics
for the industry ( all in cost + cash flow ). It is currently about 83% over this measure compared to
peaks of 40% in 2006 and 60% in 2008. Gold is down from the 100% premium over economic
value recorded in Sep. 2011. Gold can be expected to return down to economic value in the next
global recession.

Gold price volatility is showing preliminary signs of settling down after a tumultuous Half 2 ' 11.
If the current rally extends up toward the $1800 oz. level in the next month or two, I will look
to start shorting it again (a move not recommended for most folks). $Gold -- Shorter Term

1 comment:

roman_g said...

Hi thanks for your blog!

could you please explain a bit what is "economics
for the industry ( all in cost + cash flow )"
thanks in advance!