Dec

4

Gold, from Victor Niederhoffer

December 4, 2009 |

One wonders if 1200 is a price of reflection in gold.

Allen Gillespie replies:

Bernanke is a Depression scholar hence he must believe the key to ending the Depression was the end of the gold standard which raised the price to $35 per ounce from $20.67, a full 69%.  The decision was made on or around 3/6/09 when he made a deal with the devil at 666 on the S&P and Citigroup reported things were improving.  A 69% change in the price level from that date would be 1125 on the S&P, 11200 or so on the Dow and just above 1550 on gold and a level equal to the old S&P high.

A Quant Asset Allocation Spec writes in:

I contemplated the matter and decided Tuesday that enough was enough, and to not further engage in hog-like behavior; although without enough conviction to lean against the powerful move. My greatest concern now is in which asset(s) to establish a new position. Is the re-flation trade nearing an end? Paramount to me is reducing excessive intra-portfolio correlation risk without getting run-over. Is building a larger cash position appropriate, and if it is, in which currency?


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5 Comments so far

  1. Diego Joachin on December 4, 2009 1:42 pm
  2. Rajiv Bhutani on December 4, 2009 8:50 pm

    Vic:
    2-3 months back also, we saw dollar strengthening on the day of a better than expected job report, only to resume the risk-trade rather quickly. Today’s massive price move in Gold was caused at least to some extent by the need to manage your exposure before the weekend and to some degree by margin calls. Price action over the next few days will be critical for the further clarity on direction of Gold movement. IMHO, Gold trade has a long way to go now, its a trade that should be in vogue for at least 2-3 more months. News like some C.bank buying gold will be enough to put it on steroids once again!

    If you look closely at correlation of Euro to S&P today, after 10EST, it was a very familiar sight indeed. Euro was consolidating around 1.4950, and resumed its downward movement with sharp sell-off in S&P. From then onwards, it was the classic Euro-S&P correlation again in action. So, if Asia goes up on Monday due to great US job number, dollar risk trade might be back in action, leading to higher gold. Though market participants may take a day or two before being Gold bulls again; I guess everyone needs a day just to recuperate from the emotional and financial damage that Gold bulls took today!

    Quant Asset Allocation Spec: For keeping your cash, try a mix of CAD, AUD and Norwegian Krone. AUD, CAD are well known, some reasons for NOK follow:
    1. Solid economy
    2. Great price action over last few months
    3. No chance of C.Bank intervention in ccy markets as opposed to Swiss Franc for example
    4. C.Bank on a rate hike spree, expected to continue for most of 2010
    5. Over the medium to long run, will benefit due to intra-Europe trade also, since Norway is in simply great position economically compared to most other European countries. This may reverse if other European countries growth accelerates though!

  3. vniederhoffer on December 4, 2009 10:17 pm

    ones post was written on tue was gold 1210 ish. v

  4. vniederhoffer on December 4, 2009 10:18 pm

    The post was set in motion by the headline report that the world's leading cronies were forecasting gold $1400 for two years hence. vic

  5. the little gold man on December 5, 2009 12:09 pm

    Here is the headline on Bbg News:
    >
    >*GOLDMAN SACHS SAYS GOLD TO AVERAGE $1,425 AN OUNCE IN 2011
    > STORY TO FOLLOW.
    >
    >–NICHOLAS LARKIN
    >
    >-0- Dec/03/2009 15:57 GMT

    That would be 8:57am in New York

    The price range for 12/03 was

    12/03 1216.00 1218.40 1206.50 1218.30

    as best I can tell from the chart the 8:57am price was 1215 (although my eyesight is not very good).

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