Larry Edelson: Still Skeptical of this Gold Rally

by | Sep 17, 2009 | Larry Edelson, Precious Metals | 15 comments

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    Cyclical analyst, forecaster and investor Larry Edelson, of Uncommon Wisdom Daily, shares some thoughts on gold, the US Dollar, the Dow Jones and the recession. (Edelson’s Video Blog is below the excerpts and comments)

    I still skeptical of this gold rally. It is not, in my opinion, the big one. We could see a new record high in gold, even up to about $1037 – $1040, but I do not believe, based on all of my cyclical studies and technical indicators, that this is the runaway bull market phase  in gold where you’re going to see $1200, $1300, $1500 gold and higher. That, no doubt, will be coming. But, we’re about a year away from that in my opinion.

    It’s far more likely that gold will either top out here or suck everybody in by making a new high around $1040 – $1050. And as tempting as it is to jump on board this gold rally very aggressively I think it would be a mistake. It’s far more likely that gold will top out here, then pull back sharply to shake out all the weak longs and the weak Johnny Come Lately buyers. And then, next year, begin the real leg up in gold.

    My Comments: I tend to agree with Mr. Edelson for the near-term.  The dollar is not dead yet. In my view it can just as easily turn to the upside as it did in late 2008. This would be bad for gold and equities markets. I don’t believe that a complete  decoupling between gold and the stock markets has occurred  yet and this may be the final time that the Dow Jones and Gold will move together. After this next collapse, if it happens, we should begin to see gold decouple from broader stock markets as investors start losing confidence in the public sector’s ability to manage this crisis.

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      1. I am in agreement with Larry. I don’t have the technical tools that he does, but I know that a real surge in precious metals will be due to REAL inflation and not just inflation fears. I have recently bought puts on silver to take advantage of the pullback we are about to have. Hopefully I make a little money in the short term here.

      2. I think good call on the silver Puts…

        did you buy those on SLV? and.. if you don’t mind sharing, which strike/expiry? just curious.. i am still learning the ins and outs of options. i like to go in there and do the price models and such before i buy.

      3. What do you guys think about platinum’s moves over the last year or so…

        The only reason I ask is that I think last summer platinum was way up (with oil…) to over $2K.

        Is it at all significant that it has not gone up that much this time around?

        Does it perhaps imply that Larry is right?

      4. I do not follow Platinum very closely… but it definitely follows gold for the most part, just like silver.

        I think recent boosts in Platinum are from 1) up moves in gold 2) cash for clunkers.

        In summer 2008 i think plat was enjoying those highs because, well, we weren’t in a crisis and no one thought car sales would collapse, or the entire economy for that matter…

        but by November, it was at parity with gold (almost)… at the time, i was moving in to gold and silver and kind of skipped plat because i was afraid of the car manufacturers getting hammered even more, and also, green cars, some of which us tech that doesn’t require platinum, but i think palladium instead.. i forget exactly.

        anyway, i am not sure why it is so high right now.. maybe a cash for clunkers big bounce?? 

        If gold and silver drop, maybe we get another shot at platinum near gold parity? but that would need to be a massive crash, i think.

      5. I don’t have much of an option on either platinum or doritos, but the silver puts I have are in the futures market. I bought one when silver went up to around 16.17 per ounce, then another one yesterday when it hit 17.35. I have low strike prices at 13.75 and 15.00 respectively, but I am hoping to sell them to someone else before their expiration on 10/27. I personally own physical silver and gold so if it goes through the roof I will lose on my puts but cash in on my physical. Everything indicates a sharp pullback (in the short term) for precious metals in general. If you are looking to go long I wouldn’t even think about it right now. If you don’t like taking risks then don’t go short either. I’d go long silver at about 14.50 per ounce. Can’t tell you how soon that will happen, though.

      6. I meant to say *opinion* on platinum or doritos. I hate it when I ruin jokes with misspellings.

      7. thanks for the info on your options. I do the same.. buy the option, wait till it goes up a little and then off-load it… who needs 1000 shares of SLV if your strike is hit??

        also this : “If you are looking to go long I wouldn’t even think about it right now. If you don’t like taking risks then don’t go short either. ” is great advice.

        I have told some of my friends that if they are afraid of shorting the market, the best thing to do is basically sell everything and sit in cash. You are essentially going Long the dollar, and as such, shorting the market at the same type.

        The “option” thing actually made me laugh… i was like.. hmmm… i wonder if i can buy calls on just Nacho Cheese Doritos…

        a totall new commodities market…  

        Long Doritos — added 20% quantity of chips means more people will buy these then other brands.

        Short Twinkies – new “fat” taxes will stifle products like this.

        this could be big….really big.. they have an exchange for carbon credits (interestingly, investors include Al Gore and Goldman Sachs)… so why not a grocery good commodities index?  The GGCI is the future of commerce.

      8. Ha!  Good stuff…

        First re platinum  – what I was trying point out is that platinum HAS NOT gone up to anywhere near it’s high in 2008…which was like $2300(!)…but gold HAS gone back up…and surpassed its prevous high.

        Does that mean anything?

        Re Doritos – the +20% is nice…but I fear that they too might be affected by the new tax…Personally, I recommend the Peppercorn Ranch Sun Chips.

        Those things are money…and not quite as bad for you…they may provide a safe haven from the new “fat” taxes.

      9. ahhh.. i see your point with Plat… perhaps it is affected from the industrial use side.. lower car sales maybe?

        FYI: SHTF Plan Advisors LLC has downgraded Doritos on new information to neutral/sell.

        SunChips have been upgraded to a BUY/HOLD.

      10. The main difference btw gold and platinum is that platinum is just a precious metal while gold is both money AND a precious metal. Therefore they will not always move in the same direction.

      11. Damn.  Sun Chips are made by Frito-Lay…which also makes Doritos…AND Frito-Lay is owned by Pepsi…

        …and Pepsi will most likely NOT provide the safe haven I was referring to.

        More rambling thoughts from this insane person:

        Re gold and platinum – I’ve always been somewhat “confused” by the “holy” stature that is given to gold.  Yes, I realize that it has been considered money essentially since the beginning of time…and it generally, if not always, retains value…and WE USED TO BE on a gold standard…

        But why?

        For example, doesn’t platinum have more real world, industrial uses?  I don’t know…and it may not that matter anyway.

        As I’ve expressed before, if the S REALLY HTF, who’s going to give a damn about gold?  That is, if we get to the point where we need hard, actual gold on hand (coins or bullion) for bartering or whatever, we are in such trouble, that I honestly believe my guns and ammo will be worth just as much – if not more.

        I’m NOT saying that I think gold is a bad investment…at all.  Nor am I saying everyone should sell all of their gold and buy ammo…

        I’m just saying that if things really go haywire…and I mean like Mad Max…not even Mad Max I – I’m talking The Road Warrior and/or Thunderdome, what good is gold?  Unless of course, people still want it…which I guess could happen – but it seems like other things would be worth more.

        OK, I’m done.

      12. I have had this same discussion with family members and friends.. and what it all boils down to is…. gold is worthless! really, the only thing it has going for it is that it is quite shiny and pretty to hold. Other than maybe turning it into flakes and consuming it on a $1000 chocolate mousse, I don’t see any other real world use for it.

        But for some reason, going all the way back to ancient civilizations, it has had value… pretty much, the only thing that makes gold worth anything is perception…

        To me, it seems that silver would be worth much more than gold from an industrial use standpoint… of course, there is much more silver available, hence the lower price.

        But yeah, gold is essentially worthless and the only reason it is worth something is because we have confidence in it as a tradeable instrument.

        Nonetheless, it seems to have survived the test of time.. for some wierd reason.. I know past performance is not indicative of future results, but 8000 or so years of solid stats makes me want to own some just in case.

        In addition, other tangible goods.. like food, guns, ammo, gas, etc. are probably good to hold during a crisis if one has the storage facilities for them.

        In a total Thunderdome type SHTF scenario, we probably won’t need gold… the key players will be levels 1 and 2 on Mazlow’s hierarchy – food, water, shelter, etc.

        I am not sure things will get that bad globally.. but hey, you never know…  But, so long as bankers/countries value the precious metal, in a total breakdown it is good to have because it can still act as money in a barter and trade environment.

        It seems to me that there needs to be some sort of ‘currency’ or widely accepted monetary unit to make things work efficiently… Take a fishing tribe from 5000 years… say they needed some where from an agri-tribe… and they wanted to trade fish for wheat.. but the wheat guys were stocked up on fish and didn’t want any… the fish guys would be screwed.. unless of course they could convince the fruits & berries guys to trade for the fish, and then subsequently trade the berries for wheat, since that is what the wheat guys really wanted… This seems like quite a pain in the but, and is probably the reason why a central monetary unit was needed.. and since gold and silver were rare, they seemed to work well.. i think even copper and bronze were used at one point…

        nowadays, to be honest, it seems to me like technology allows for easy access (more or less) to gold.. is it possible that because we can pull gold out of the ground en masse, and the fact that it really has NO real life application, that gold may not be as ‘rare’ in the future as it has been in the past?

        Water is the new gold.

        I am going LONG OZARKA!

        long rant… sorry. the devil took over my keyboard.

      13. Gold is worthless? How idiotic a comment that is. Gold is all over your computer’s chips, All over factory equipment, all over medical equipment, and all over the tons of jewelry that is made every year. And it is very finite. Gold is worthless? Get off your armchair boy

        Silver is used more in industry largely due to price. Gold is a much better conductor but the price makes silver the competetive choice. In a world gone awry wheat could be the new gold depending on the situation. Gold will always have value over the long haul but I am strongly attracted to my remote farmland and a means to protect it as my ultimate hedge against collapse.

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