posted on Mar, 21 2011 @ 05:54 PM
GOLD: The 1980 High ($850) adjusted for inflation (govt stats) is $2100-2200 (higher on shadow stats). But that 1980 high was a spike high where it
doubled in less than 2 months and imploded back down to those levels in quick fashion. That high benefited from the short squeeze in Silver (which
went to $50) when the Hunt Bros were trying to corner the market and caught the COMEX traders short who sold into the rally. They changed the rules
(liquidation only) and silver collapsed back to $5 in rapid order. That time frame also was accompanied by double digit inflation and the Russian
invasion of Afghanistan. The LT Cycle in gold was due in 1981 but it came a year early (a lower high of $625~ came in 1981). That same LT Cycle High
is due this year, 2011. Time (especially after 11 yrs up) favors a top. Price, however, when compared to the gold rise from 1974 to 1980 (6 yrs up) a
move of ~8.5x suggests a move in the area of the "inflation adjusted high" [(850/103) x 256].
SILVER is tighter than Gold right now but it is more of an industrial metal than a monetary metal so it is more susceptible to an economic slow down.
About a 1/3 of this year's rally has been the result of the Fed's QE and 2/3s due to the short squeeze of the JPM short position. JPM has supposedly
spun off that trading desk and it has covered more than half of their shorts. Will they cover them all or do they now have some dry powder in which
to put some more back on to try to knock the market down again? I dont think that they will go out on a limb again unless the stock market continues
down and then they will smell blood in the water and hit it hard - to force out weak longs and cover some more shorts at lower levels. I posted this
previously but despite that comex silver is not at record highs dealers are paying more for silver at $36 (ie 90% coins) than they were when it hit
$50 (they factored in the weeks long period to get metals to the refinery).
Diamonds have an advantage in that you can carry a fortune around in your pocket and you wont set off metal detectors BUT they are not fungible
(easily exchanged like a maple leaf for a gold eagle). They have different grades (color, clarity and cut) and sizes which creates a highly variable
price/stone matrix. In addition (as already noted) there is a big spread between the bid and the ask so diamonds are not liquid (readily converted to
cash without a drop in price from what you just paid for them). Also, the market supply is controlled by the DeBeers syndicate (altho the Russians
are making some inroads into their market share). Finally, the future for synthetic diamonds is good and one day the market could be flooded with
synthetic D-flawless diamonds that would drive diamond prices down.
Rare gold coins have some potential (never would be called in) but they need to be coins that were meant for circulation (ie, pre-1933 gold coins) and
not contemporary bullion coins. In addition there are big spreads in the coin market also....caveat emptor.
IF you have a lot of money then gold gives you the greatest concentration of wealth (except for rare coins, diamonds and precious colored stones) as
the current value is ~40x silver and gold is considerably denser (heavier) than silver.
Silver has the greatest potential as the gold silver ratio could go back to the 1930s when it was ~(20) x .97 / (1) x .77 altho it could be engineered
with a big move to remonetize gold to the 50:1 level where it was in 1986 when the treasury first issued Gold and Silver Eagles with $50 and $1
denominations, respectively. Silver, however, has had a more linear rise over the last year and thus is theoretically more vulnerable to greater
percentage losses should the markets go into a prolonged correction before the final blow off. Given that gold in the 1445 area has reached its Long
Term Projections generated by the drop from 850~ to 255~ back up again it is vulnerable to another correction of the magnitude of the 2008 mini bear
market. But we will not go below $1000 again. How high we go is a function of how low the dollar goes and that is hard to guage before the next
Bretton Woods or Plaza Accord that intervenes and sets up some sort of new world reserve currency trade unit (basket of currencies nominally backed by
gold [like a 10% reserve ratio]).
edit on 21-3-2011 by CosmicCitizen because: (no reason given)
edit on 21-3-2011 by
CosmicCitizen because: (no reason given)