Monday, December 29, 2008

Hot War in Gaza, Cold War in Pakistan and Gold is Only $880 an Ounce? Sounds Like a Short to Me.

On Friday David Gaffen put up a post at MarketBeat, "Gold, Not so Golden in 2008" that may have set a record at MarketBeat for number of comments:
It’s been a terrible year for most major asset classes — stocks, real estate, hedge funds, and commodities. One of the assets that investors might have expected to do a bit better in such an environment, when the vast majority fled to higher ground, was gold. But gold’s performance this year has been a disappointment.

As of Wednesday, gold closed at $847.10 per troy ounce, up 1.5% on the year. Compared with a 40% decline in the Standard & Poor’s 500-stock index and a 60% drop in crude oil, that’s just fine — it is, after all, a return of capital. But analysts say gold failed to capitalize during market turmoil because for much of the year, gold was as much a part of the craze as any other asset.

“We weren’t necessarily seeing the rush to safety of this safe-haven market that gold has been in the past,” says Darin Newsom, DTN senior commodities analyst. “We were seeing a get-me-out effect in all commodities, and there was no belief that the gold market was any more sustainable than any other commodity.”>>>MORE

Not that they were intelligent comments:

Jon Nadler is a f—- idiot aand you denigrate your newspapers’reputation by publishing his views.

Comment by John Embry - December 26, 2008 at 12:54 pm

Yet another example of how Rupert Murdoch is doing whatever he can to discourage people from investing in gold so he can pump up the US economy and the equities markets.

Comment by Numis - December 26, 2008 at 1:36 pm

David Gaffen is a filthy criminal accomplice.

Comment by Heard Junk - December 26, 2008 at 2:04 pm

I have read a good number of puerile, idiotic stories about gold this year, but this one takes the prize. Mr. Gaffen clearly struggled to string together 455 words to meet a deadline and turned in a stinker replete with shrill tone and bolding a down-on-his-luck mattress salesman would find excessive and cheesy.

And then there is dear Jon Nadler. He has been evangelizing deflation fervently for months and his smug writing easily betrays his very irrational need to have gold stay in a range between $500 and $700. Why? Has his boss figured out he made wrong-way bets that risked the business?

Comment by DailyGrind - December 26, 2008 at 2:27 pm

I’m just amazed that the WSJ would publish such a poorly edited article:

“For now, investors will have to contend with the fact that it was one of the few assets that did not lose anyone money.”

I have to believe that David Gaffen (gaffe is the French word for “mistake”) meant to write that “Investers will have to be content with the …”; as it is written, that closing sentence does not make much sense.

Comment by The Pikaia Group - December 26, 2008 at 2:53 pm
And 196 more. On November 20 we wrote:
...Chartmeisters have a general rule "The longer the base, the bigger the move". I have to be careful here, I am predisposed to be short but I've gotta say, this chart is looking more and more like a pop to the upside....

The next day gold was up $42.00 and we posted "Climateer Investing on Gold: Sometimes You Get Lucky". Today gold is trading hands at $880.40, up $9.20 and I am thinking of going short.
Looking at Kitco's 1-year chart you see the series of lower highs and lower lows that defines a downtrending market. The test will be in the $910 area. If the shiny stuff can't get there and hold, it confirms the downtrend (for me) and may go all the way back to its November $680 spike bottom:
click to enlarge
An India/Pakistan nuclear war would be bad for the climate too.
From Reuters:
SCENARIOS: Assessing risks of India, Pakistan confrontation

From EurekAlert:
Regional nuclear conflict would create near-global ozone hole, says CU-Boulder study

A limited nuclear weapons exchange between Pakistan and India using their current arsenals could create a near-global ozone hole, triggering human health problems and wreaking environmental havoc for at least a decade, according to a study led by the University of Colorado at Boulder.

The computer-modeling study showed a nuclear war between the two countries involving 50 Hiroshima-sized nuclear devices on each side would cause massive urban fires and loft as much as 5 million metric tons of soot about 50 miles into the stratosphere, said CU-Boulder Research Associate Michael Mills, chief study author. The soot would absorb enough solar radiation to heat surrounding gases, setting in motion a series of chemical reactions that would break down the stratospheric ozone layer protecting Earth from harmful ultraviolet radiation, said Mills....MORE