|
"...Trying to ride this bull market in gold often feels like
trying to get your heaviest friend home after way too much beer..."
THE
GOLD PRICE just closed out November '07 at an average of $806.25 per ounce, a
new record high – and the third record month on the run.
Not that you'd know that
from reading the newswires this weekend, however. And fair's fair.
The bull market has just
collapsed after all...
"I think you've got
liquidation," one trader said to Dow Jones as the Gold Market sank on Friday.
"The gold bulls [are] throwing in the towel here."
"When you see so much
volatility at the top of the range that tends to signal the end of the
move," said Richard England, a trader at Standard Bank. "I'd say
the risk to the Gold Price is to the downside."
Indeed, "gold's raving
rally is over," as another metals-head said. Put another way, selling
gold will give investors "an avenue to benefit from the prospect of a
stabilization in the Dollar," just as Jim O'Neill of Goldman Sachs
advised on Thursday.
"We would now use a short exposure in gold, expressed in US Dollars, to
capitalize on a gradual relaxation of credit concerns in the financial sector
over the coming months."
And just how far does
Goldman Sachs think the price of gold will tumble as the credit markets spark
up a joint and breathe deep ahead of Christmas? The only US investment
bank to actually make money during the credit crunch so far (albeit on paper
and marked-to-model) reckons you can look for a 15-20% setback, driven by a
bounce in the US Dollar.
Something doesn't fit,
though. "Did you see that the metals desk at Goldman Sachs just
recommended gold again?" noted a leading and very experienced
gold-market analyst to me by email today. It begs the question, we agreed.
Is this a political ploy?
After all, the US Dollar
has never worth less on the international currency markets. Treasury
Secretary Henry Paulson says he believes in a "Strong Dollar"...and
yet he's done zip to beef it up, either higher interest rates at the Fed or a
slowdown in US
government debt growth.
And he did use to run
Goldman Sachs as its CEO, you know.
"We see scope for
acceleration through $770 to re-test the $600-650 levels prevailing ahead of
the summer," O'Neill went on, while on Tuesday this week, his colleague
at Goldman Sachs in New
York, Oscar Cabrera,
forecast average Gold Prices in 2008 of $800
an ounce, up from $687 in 2007.
"We see upside risks
to our forecast," Cabrera added – meaning that the gold market
looks likely to rise above even his revised targets.
Better get your story
straight, Goldmans! Is it time to buy, sell or move
onto shorting subprime mortgage-bonds that you
issued last year? (For more on that,
read on here...)
Conspiracy theories aside,
it remains a fact that trying to ride this bull market in gold often feels
like trying to get your heaviest friend home after way too much beer. At
first glance, the big fella seems an immovable
object. Once he's slumped on the pavement, he stays slumped – or so it
looks.
But you know for a fact
that he really is making progress. So if you just stick with him, you really
will both get home, maybe some time before dawn. The
trouble is, making progress means getting your over-sauced friend up on his
feet.
And that's when the trouble
begins.
Soon as he's up, he starts
lurching from street-lamp to street-lamp, shouting at strangers and waving
his fist at the cops. The big guy gets mighty quick too, sprinting first into
the traffic and then straight back onto the sidewalk.
Anyone who gets in his way
risks getting squashed under the weight of hops, malt and yeast in his belly.
Crashing about, he keeps taking eight giant strides back for every 19 steps
forward. And he keeps on repeating – in a slurred but ever-angrier
growl – that he ain't going nowhere until he's got a kebab or a pizza to help soak up
the booze.
Slow progress still comes,
however, as you steer out of the traffic and back onto the sidewalk. Given
chance, you might even get him onto the night bus in one piece.
Sobered up and back at our
desks, it's not just in Dollars that gold's long-term bull market rolls on.
Versus the Euro, gold
averaged more than €549 per ounce in November, a new 24-year record.
Measured in British Pounds Sterling – against which gold hit five new
all-time highs this month – gold in November averaged £389 per
ounce, another record high.
Does that mean the gold vs.
Sterling is
only sure to keep climbing? No, not at all. But standing 145% above its bear
market low of August 1999, Gold
Priced in Pounds gives the lie to Sterling's
strength.
Yes, the former world No.1
hit a quarter-century high to the Dollar this month, up there above $2.1150.
But it's been losing against the rest of the world's money at the very same
time, dropping more than 3% for 2007 to date.
And priced against gold,
the Pounds in my pocket (what few there are...) have never been more
worthless.
By : Adrian Ash
Head of Research
Bullionvault.com
City
correspondent for The Daily Reckoning in London,
Adrian Ash
is head of research at www.BullionVault.com
– giving you direct access to investment gold, vaulted
in Zurich, on
$3 spreads and 0.8% dealing fees.
Current gold price, no delay | FAQ | Detailed outlook for 2007
Please
Note: This
article is to inform your thinking, not lead it. Only you can decide the best
place for your money, and any decision you make will put your money at risk.
Information or data included here may have already been overtaken by events
– and must be verified elsewhere – should you choose to act on
it.
| 
