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Golden Fleece

June 1 2013 -- A friend asking what I thought, sent me this graph showing a coming turnaround in gold. My answer was, “not much”. Anyone who reads my writings should know I see no future for Gold. 

Predicting future movement with charts is called technical analysis. I am schooled in it, and I learned chart interpretation from John Murphy and Art Hill -- the best in the business. I even display charts all the time in my blog. That said, any honest technician would tell you that charts are always “trumped” by fundamentals. For example the night before Sept 11 2001 you could draw all the charts you want, of course the next day once those plane hit, the stock market behaves completely differently - immediately.

The lines drawn on this chart above are called a fib retracements, and it is true that some magic number like “half way back” also called a 50% retracement, can create attractive buying opportunities. A nice line at the 38.2% magic number is coming up. It is logical that anything that sells-off, takes a breather, it finds buyers at some price and the price goes up for a bit. But this buying will be short lived if the fundamentals do not hold. There must be many people buying gold if the price is going up. That is fundamentals.

For example, once fraud was revealed at Nortel and at Enron nothing was going to save the stock. Buy even when it was all falling apart, as they fell, there were technicians drawing charts that predicted a turn-around. Those charts were made without regard for the idea, the firm's accountants lied, the shareholders sold all the shares, the party is over. (Enron chart right) Both those stocks went to nothing and both firms stopped existing. No one buys film for cameras any more -- is it any wonder Kodak is gone. Draw all the lines you like -- fundamentals always trump technicals.

I don't doubt gold will rise a little bit here for the next few weeks. In fact it is important that is it does. Big Wall Street firms, like Goldman Sachs run the price up now and then to bring in someone to buy. It is called "feed the ducks" read "suckers" who buy bad investments from their big clients who need to unload big positions. Right now HSBC has more gold than any private organization has ever held for sale. George Soros one of the world biggest funds and many hedge funds holding gold are down some 20% this year and are rotating out of commodities into stocks. Literally trillions of dollars in gold must find suckers to buy it.

Gold has for a million years has never been worth more than $400 except for one brief bubble when I was becoming an adult. For the last 11 years out of fear of inflation gold has shot up to $1,800. But read here why there is no inflation. Mostly due to buying by one hedge fund called the Paulson fund. Paulson is out of money and losing investors. Read about Paulson here. The great buying spree is over. Now there is nothing to do but sell the useless stuff and very few people are buying. Russia puts on a brave face nibbling here and there, Azerbaijan is buying a bit too and so is Mexico. Allow for buying of 1 metric ton of Gold for these nations, and 3 tons for gold coins and jewellery. Meanwhile reserve second in size to the US gold reserves are being dumped. 2000 Metric tons of Gold is being sold now and there are no buyers, except the guy who made this chart.  Like peeing in the preverbal ocean. Read about it here.

Fancy charts bamboozle, but even an eight year old could look at my simple chart below and see where Gold is going. 

Read my old postings -- it is all there…