View Full Version : Ultimate collection of best-practice indicators of a future top in gold!
10-24-2010, 03:20 AM
Like many of you, I consider an intermediate top in gold (bubble top) far away at the present time (at least not before the next presidential/FED change).
However, I think it behooves us to think ahead and be prepared while maintaining a rational investment mentality in physical gold.
Therefore, the idea here is to collect a variety of indicators which may (in sum or by themselves) point to an appproaching top in gold in the future (whenever it may be).
This is not meant as a discussion of when this top will be or what the price objectives are, but merely as a collection of tools for everybodies benefit.
Let me start this of in no particular order:
Significant change in leadership or mentality at the FED (a la Paul Volcker)
Significant change in leadership/mentality in the US executive (a la politicans like Thatcher/Reagan who will slash and cut)
Global investor gold exposure (physical, ETFs and mining shares) above 15% (currently 0.85% of global assets, was 26% in 1981 and 30% in 1948)
Length of the overall commodity cycle (currently year 10, historically the cycle lasts 15-20 years at least)
Dow/Gold ratio below 2 or 3 (monetary inflation may push all asset classes though so I will put this one up for debate)
Much more commonplace gold-related financial products for the mainstream investor (especially heavily advertised ones)
Gold chatter on Financial TV and in mainstream discussion that is consistent and decidedly bullish
Let's try to expand this list with well thought through additions and explanations why you think they are applicable and relevant.
THANKS TO EVERYBODY WHO WILL PARTICIPATE!
Silver Tongued Devil
10-24-2010, 03:54 AM
It appears to me that no one knows what is going to happen. The predictions range from deep deflation to hyperinflation and everything in between. Everyone is trying to figure out what is going to happen and positioning their porfolios based on their favorite theory. At the same time, the goobermint, the FED, wall street fat cats, the super-rich, and corporate CEOs appear to be watching it all and calculating how they can make it all collapse out from under the middle class and leave TPTB richer than ever with everyone else as their slaves.
So, I could not say where or when or at what level a top will occur.
All I can say for certain is that most of us are mad as hell :mad: about the current state of affairs and we'll do what we can on election day to get even. If things get any worse, we may make France look like a well-behaved church meeting by comparison. :eek:
10-24-2010, 04:04 AM
Thanks for your insight. The idea is to collect, summarize and categorize all signs people think of as significant for predicting and spotting the longer term top in gold.
We all know that this is uncharted and bad territory, but nevertheless need to make prudent investment preparations.
10-24-2010, 06:31 AM
The Dow and gold at 1:1.
The price of gold in dollars has gone parabolic.
The powers that be announced a new currency.
Comex and LBMA cease operations.
10-24-2010, 08:25 AM
Reinstitution of executive order No. 6102.
10-24-2010, 10:54 AM
10-24-2010, 11:26 AM
• Real interest rates – Both the current and future outlook. Look at what occurred under Volcker with real interest rates and determine if that’s in the cards. Consider debt, both public and private and how interest rates impact them.
• Fraud and corruption – Consider Social Security, Medicare and pension systems and take a look at derivatives and accounting practices. Simply put, how trusted are the institutions?
• Money supply – Shadow Stats has some good information on M3 which is no longer published. Do you think the dollar is undervalued or overvalued? How strong is the integrity of the currency? Is it being debased (i.e., lower weight in Roman coins or modern day printing presses).
• Stability – Study geopolitics, climate issues, natural resources, and other factors that could disrupt an interdependent system. How safe do people feel?
• Gold availability – Look at past ownership of gold, government policies and supplies.
As you mentioned, a more technical approach is to look at the Dow/Gold ratio.
10-24-2010, 06:23 PM
Great ideas so far, thanks for all the participation.
Another measure may be the Mises Institute True Money Supply (TMS):
I really like Shadowstats as well though and their continuation of M3 (called M3 SGS) as mentioned above by somebody else:
10-24-2010, 06:40 PM
I don't believe the well known money supply aggregates (M1, M2, M3, TMS, MZM, etc) have as much bearing today as they did even 5 yrs. ago. TPTB have created their own "monetary system" that is based on debt and credit where derivatives, currency swaps, and other accounting tricks play a central role. Unless you factor those into the equation somehow, just looking at the M's might lead to an erroneous conclusion.
10-26-2010, 04:10 AM
Anybody else? All opinions are welcome and appreciated, especialyl expert opinions ;)
10-26-2010, 09:14 AM
The Gold to Silver ratio is less than 20:1.
10-26-2010, 09:33 AM
When these three go green, I sell. Of course, I've been waiting ten years; it's kept me in this metals bull market through thick-n-thin. Search the Kitco forums; you will find I have been consistant on these over the years.
- Interest rates (double digit)
- Public opinion (gold fever)
- Dow/Gold ratio (1:1)
None of this has occurred in this run, but we are just now seeing a sparkle from number two.
10-26-2010, 10:33 AM
Federal Reserve Notes, along with every other currency in the world today, are unsecured, artificial instruments. Their only "value" is that which comes from confidence that the issuer will maintain a benevolent control. As the Federal Reserve loves to quote, "backed by the full faith and credit of the U.S. government."
While the U.S. government is an awe-inspiring institution certainly deserving of faith and credit, the Federal Reserve is not quite as worthy of either attribute. We have no way to monitor the Fed's performance other than with their own information, technically shrouded in their own terms. In other words, warm smoke up your ass.
Unless we somehow gain access to accurate information on the performance and policies of this agency in control of the currency, we haven't a snowball's chance of developing a monitoring system.
I suggest that we consider the entire Federal Reserve System as a black box with inputs and outputs that we CAN monitor, such as the ratio of gasoline to avocados to man-hours, or other useful indicators, and leave the internals of the box, the M2s and special drawing rights, to the obfuscators.
In other words, factor the FRN completely out of any financial equation. It's temporary, it's unknowable, and like the Emperor's beautiful clothes, it's a fiction!
Legio Patria Nostra
10-26-2010, 10:53 AM
A close friend ( his advise was/is always rock-solid )
said to look for following warning-signs :
1 . If the banks get's serious ... meaning if they start to pay interest on your savings .... interest that get's close to inflation ... at present they pay 1-2.4% while inflation is over 6%
2 . If you can buy a house in Europe for +/- 120 ounces of Gold .... at current prices it's around 230 ounces
3 . If you can buy the Dow for less than 5 ounces .. at current rate Dow is a little over 11,000 ....meaning you need over 8 ounces ...
Of course that is not to say that gold has reached his high when one of these events come true .... but it might be a good indication ....
Me personnaly .... if one of these events are true ... I'll cash in 33% of my Bullion-stack .... if a second should take place .... another 33% ....
The rest .... I leave it up to chance ....
10-26-2010, 01:05 PM
While the U.S. government is an awe-inspiring institution certainly deserving of faith and credit...
Yes, with every passing day, it inspires my awe more and more.