Join The Trading Room

NYC Gold Expo Blissfully Subdued

By Rick Ackerman Posted on May 13, 2009, 12:01 am EDT Last Updated May 13, 2009, 4:17 am EDT

The scene at the Hard Assets Investment Conference in New York City looks pretty subdued this year — an encouraging sign, since it will be time to exit precious metals when this annual event reaches the frothy stage.  For now, though, frothy it is not. I’m told that there are only half as many exhibitors this year as last, continuing a pattern of decline that began a couple of years ago (when, need I remind you, gold quotes were nearly 40 percent lower).  Mining and energy companies with booths at the show were oh-so-eager to chat up anyone who walked by, and at times there were more company reps in the aisles than there were visitors.  I don’t mean to suggest that this event was a dud — only that it reflects the bland consensus on bullion that obtains outside of hard-money circles.

hui-breakout-small

Let me repeat myself:  This is quite bullish, to the extent that multitudes of investors yet to be persuaded and who stayed away in droves represent potential demand for nuggets yet to be mined and ingots to be fabricated. I should also say that the conference itself, at the Marriott Marquis, was first-rate in all of its details. The line-up of speakers represents a who’s who of the precious metals world, as well as newsmakers from other walks  of life. Harry Markopolos, the guy who tried so hard to rat out Bernie Madoff to the SEC, gave the “Insider’s Story.”  Jay Taylor, the expert’s expert on mining shares, shared his considerable expertise.  And Bob Prechter delivered Monday’s keynote: “Using the Wave Principle to Forecast Gold and Silver Prices”. Peter Schiff spoke on the collapse of the U.S. bubble economy and what it means  for investors, and Amity Shlaes, author of a superb new book about the Great Depression, shed light on the government’s efforts to repair the financial crisis.

HUI Near a Breakout

There were also presentations by companies both big and small from the world of mining, energy and natural resources, including some favorites of ours such as Pelangio Exploration and Esperanza.  Ironically, while speakers from these companies were working hard to convince the audience that now is the time for hard-asset investors to go all-in, the Gold Bugs Index (HUI) was stealing up on a technical threshold that some chartists might view as breakout territory. Mining-share aficionados should be smacking their lips over the fact that this could happen so quietly. We can’t say exactly when the mining sector is going to blast off for outer space, but there is no mistaking the evidence that they are fixing to do so.  Let’s hope that when it finally happens, few take notice.

  • Rich May 15, 2009, 1:56 pm

    Dear GC
    Maybe you are right.
    I’ve only been trading gold and silver for 50 years.
    Good luck.
    Regards*Rich

  • Gerald Clifton May 14, 2009, 7:30 am

    Frank, I am sorry, but I have to go with Rick on this one. The contrarian mentality rests on how much INTERESTED money is on the sidelines, waiting for lower prices, and how much fervid money has already been committed. This is the assumption that lies behind RSI and MACD momentum indicators. Money already committed, within the context of a larger bull market matrix, is dead money. It can only sell. Money as yet UNcommitted, within (again) a strongly trending matrix, is “live” money, waiting to go back in.

    I believe that most interested money is on the sidelines, here, probably because of past seasonal patterns (“sell in May and go away” applies to the gold sector, too). It won’t take much to get them sucked back into gold and the gold mining sector.

    So what do you do with this sort of ambiguity? Stay small. Eschew greed. I am not enough of an options expert (Rick is…) to recommend options plays here, but if YOU are, play ’em from the long side concerning gold and the quality companies who mine it. Remember, the $HUI:$GOLD ratio is STILL ridiculously cheap, basis the miners (hell, many of them are priced for $600 gold — and gold, last time I looked, ain’t $600). Calculate your risk/rewards parameters, and find a way to commit a CONTROLLED amount of your trading capital to gold. It is a set-up, and the macroeconomic fundamentals support the sentiment and the the technical indicators. Trading is risk. And you have to lean against the macro-sentiment, which has NO understanding (especially those who believe in the world supremacy of the US dollar) about what is behind this tremendous gold bull. Debt. Debt is “what.” And, in that regard, we are getting WORSE, not better. Sometimes you have to look seriously at the obvious.

    Rick and I probably disagree on many things, politically and economically. But, concerning debt, we probably agree that it is never a good thing. Productive debt? Okay, I’ll give you that point. As long as the debt produces real growth, as opposed to merely perpetrating a numbers-manipulated scam, I suppose it is okay. I admit even THIS reluctantly. Underleveraged growth is probably best, but leveraged growth is okay. But can ANY sane person argue that today’s growing deficits are going to be PRODUCTIVE?

    Unproductive debt is the kiss of death. The closing of the cell door on your freedom. And gold marks to unproductive debt. It has to. It is the basis.

    Sentiment set-ups are the best. And the attendance and enthusiasm at various important conferences for gold can be excellent contrarian indicators for the state of the current gold bull. Apathy is the best. As Rick notes. It means sidelined gold bulls are confident they will be able to come back in at lower prices. And it also means they will chase if they are wrong.

    Being a gold bull (no, I have no product buried in my back yard, and no underground bunker with a 12-gauge, an Uzi, and a .44 loaded up with hollow points — although sometimes I DO admit to thinking about all of the above, given the delusional state of our current national leaders…), I like the set-up here. Apathy, even among those predisposed to liking what gold represents. An assumed serenity about being able to sit out the Summer and swoop in on much lower prices next Fall. No. I am not all in, mind you, but I am SOME in. Too much s**t in the stew to be all out.

    Good luck, all.

  • Gerald Clifton May 14, 2009, 4:36 am

    This is an answer to Rich. Aloha back at you, Rich. You note that “…large traders are triple short…” silver, according to the latest COT reports. You are dead wrong. As of last Friday’s report (which covers through last Tuesday), 59 large traders registered as “large speculators” (that is, those trading 200 contracts or more) were long 25,664 contracts, for an average position of 435 contracts per large speculator bull. 37 traders registered in this same category were short 5,055 contracts, for an average position of 147 contracts per large speculator bear. In other words, the bulls outgun the bears one-and-a-half-to-one in numbers (59-37), and THREE-TO-ONE in contracts controlled.

    Like most folks who follow these reports casually, you do not understand how the commercials fit into the equation. They REACT to speculative activity. They are NOT speculators. They use the Comex to lay off OFF-EXCHANGE activities. Read the rules. Nobody can register as a commercial unless such an entity can prove it is economically “square” in its off-exchange/on exchange activities. You can NOT be a commercial and a speculator at the same time. You cannot register in both categories.

    When there is heavy speculative buying, all the commercial shorts can do is mark up their offers and hope for the best. They are PASSIVE, not active. When speculators are selling, all they can do is lower their bids. Again, they are passive and often serve as market makers of last resort, in addition to serving as hedgers who offset their off-exchange activities with futures contracts. They are privileged only insofar as they can trade, generally, unlimited amounts (a GREAT privilege, indeed) and normally have access to virtually unlimited lines of credit. A two-edged sword, that last.

    Similarly, you are dead wrong when you describe a so-called “similar excess of gold shorts” being “double gold longs.” Again, let’s go to the real numbers. As of last Friday’s gold report, 178 traders registered as “large speculators” were long 177,482 contracts, for an average position of 997 contracts per large speculator bull. 69 traders registered as “large speculators” were short 35,434 contracts, for an average position of 514 contracts per large speculator bear. Again, the bulls outgun the bears 2-1, in numbers and contracts. All of these numbers, by the way, include futures contracts and options. The distribution of open interest on futures contracts only represents almost identical percentages, so there are no options overloads.

    You need to go to the CFTC website and read the rules that govern commercial traders. Again, they are NOT speculators. They are hedgers, and they must answer to regularly-held audits of how their off-exchange activities match up with their on-exchange privileges.

    Many of the current myths about how commercials run the markets took root in the 1980’s and 1990’s, when gold and silver were stuck in low-level trading ranges. During sideways, drifting down markets, such as we had in those times, commercials did, in a sense run the markets. They were bidders and offerers of last resort, while speculators were guessing at the extremes. And speculative short and long positions were closer to being balanced, with the large speculator shorts having the slight edge.

    But now, things are different. Now, we are in a secular bull market in gold, even though silver is lagging. For obvious reasons. No international banks that I know of are required to hold silver reserves, while many are required to hold gold reserves. During bull markets (by definition), higher highs and higher lows trace out each cycle. When such trends are strongly in place, commercials have to scramble to square their books, because they have to “take on” the large speculators who (again, by definition, are winning the long-term grind), regardless of where their books stand at any given moment.

    Yes. I paid 5 grand for a Larry Williams seminar, during the early 1990’s, and got the scoop on how to go with the commercials. And I got 3 GREAT trades during periods when the distribution of traders, versus commercial hedgers, was unbalanced.

    BUT! That was then, and this is now. Things change. Then, we were sideways-to-down. Now, by ANY criteria you want to use, gold is in a roaring (and, as Rick notes, occasionally “stealthy” bull market).

    Your piece is greatly misinformed, as the numbers show. The bulls are in charge. Even last October and November, with gold sitting at 700 and the margin clerks running the markets, the large speculator bulls STILL outgunned and outnumbered the large speculator bears. The closest they have come to parity since 2003 was at 650 gold (the average large speculator bull’s position was in the high 600’s, while the large speculator bear’s position was in the low 600’s. Just before all hell broke loose and the bulls headed for green pastures, North of $1,000.

    Check it out. You are wrong. Neither I nor you can predict what is going to happen to the price of gold over the next year or so. But, at LEAST get your numbers and your assumptions right.

    Aloha. Good luck, and good trading.

  • D Graham May 14, 2009, 3:44 am

    In defense of the argument, one only observe the networking world and the delusional madness of Interop, the conference for every hardware maker for anything that connects to the ‘net. In Spring 2000 it was madness. Cisco was barking about a trillion dollar market cap in the near future. Hotels had to be booked months in advance. Restaurant reservations? fugettaboutit. It was absolutely nuts. That was the time to sell Cisco, Nortel, Lucent, and hundreds of companies that have subsequently become lost -not buy them…. By 2002- just a little over a year later, most of the damage had been done and it was fatal. People can’t even remember the names of the companies…. They are gone forever. It is 9 years later and Cisco, the industry darling, is still 75% off its peak price, though the company has doubled sales. Buy it when its quiet. Be sellin’ when they’re yellin’.

  • Frank ONeill May 13, 2009, 9:35 pm

    Hi Rick,
    I understand that if the NYC conference was very well attended it would make sense that many people are interested in PMs and it would suggest that the conference was a bullish event for PMs. In contrast, poor attendance would obviously be bearish, because most people may apparently not be interested in PMs. It may be unlikely that not enough interest existed for investors to go out and buy gold and silver, etc.
    However, to argue that poor attendance is bullish is, I think, more than any reasonable person can accept. In fact, it may be considered preposterous. Is this some type of a joke?
    Now, I am aware that many gold bulls argue that there is manipulation (suppression) of the gold price. Unfortunately, what you have done may be an attempt at manipulation of the gold price upwards. I do not object to this if it were cleverly. But no sensible investor would accept this proposal, or have I missed something?
    Sorry!
    Frank O’Neill

    &&&&

    As I tried to explain, it is the droves who were NOT at the show who will become buyers of gold somewhere down the road. If “everyone” had been there, they’d all have been past buyers who are already on board. RA

  • Jay May 13, 2009, 3:37 pm

    Thanks Rick for the informative report as well as thanks for the interesting subscriber comments above.

    I wrote the following comments to my family on Thursday evening May 7 and thought it to be appropriate to share them here:
    QUOTE
    We talked in early March and you asked me about the stock market. I think the Dow was 7200 at the time. I mentioned that I expected the Dow to eventually go to 4000 or lower. You asked me if you should sell your positions and I said that I would wait for a rebound to 8000 or 8500. We have now reached that target and I think we won’t get much higher prices than that for a while. I still think that my expectation of 4000 on the Dow is very conservative on the downside. The Big Banks are dry / burnt toast and tax payer fodder, to be nationalized at inflated prices (the price should really be zero, but this will not be the first time that the taxpayer gets fleeced by the Goldman Sachs mafia in the government)…

    After reading some of my favorite gurus tonight, I came across some excellent technical recommendations, which I would like to share with you. I added my own input by keeping the target prices lower than my gurus and adding some related stocks to the list. I would spread/reduce your risk among most of these. They are all so-called Exchange Traded Funds, reflecting the underlying commodities, traded like regular stocks, some with double or even triple leverage, some without. I would not make these recommendations, unless the underlying charts presented an, in my opinion, convincing and low risk picture. Time will tell…..

    Below I give you the Ticker symbols with today’s closing price. The numbers after that were just to help me personally remember how I calculated the target prices. As you can see, for example the target price for the Euro is 141. URR is a thinly traded stock, but I prefer it for the (double) leverage. If you don’t want to go with leverage, SLV is the best bet. The leverage allows you to get a bigger bang for your buck and limit the amount of your invested dollars.

    Technical Analysis:
    FXE (long Euro 134) 129 + 12 = 141 Upside potential 7 = 5.2 % time frame 2-4 weeks
    URR (double long Euro 29.7) 27.5 + 5 = 32.5 Up Potl. 2.8 = 9.4% time fr. 2-4 wks
    DGP (double long Gold 19.3) 17.0 + 11.5 = 28.5 Up Potl. 9.2 = 47 % time fr. 15-20 wks
    SLV (long Silver 13.6) 11.5 + 6 = 17.5 Up Potl. 3.9 = 28 % time fr. 15-20 wks
    DXO (dbl lng Crude Oil 3.29) 2.43 + 1.5 = 3.93 Up Potl 0.64 = 19 % time fr. 2-4 wks
    TBT (dbl short Trs Bond 52.4) 42.5 + 14 = 56.5 Up Potl 4.1 = 7.8 % time fr. 3-5 wks
    From a fundamental point of view: some commodities are going up because they were either beaten down (oil) or because there is no confidence in the US economy or the dollar or the soundness of newly printed Government debt.

    Fundamental (with some technical) Analysis:
    The following recommendations are speculative short positions, apt as protection for your long portfolio against the expected drop to the old Stock Market lows or lower. The bank “stress test” out today is a scam to hide the negative equity and the overwhelmingly large open (and losing) derivatives positions of the big banks. The truth will out eventually, even with the recently changed, more lenient (fraudulent) FASB accounting laws. The banks will need much more than the “worst case” increase in equity of 75 billion announced today, perhaps 10 times as much, according to analysts I trust. The recommended positions below offer a historically low (and therefore low risk) entry price to protect yourself against a potential break down of the market. Check out the indicated historic highs and lows for comfort.
    No.1 recommendation: DXD (double short Dow Jones 50.0), est. upside targets 75 to 150 translates to an upside potential of 50 % – 200 %, time frame 10 – 30 weeks, Hi Oct 6, 2008: 111 Lo Oct 8 2007 (this was the market top, remember this is a reverse ETF, in other words when the market goes down the ETF goes up or vice versa): 45, recent Lo (this morning: 48) Does the small 3 point difference between the 2007 high and today’s presumed market high make any sense? Not to me, but it presents a great opportunity.
    No.2: FAZ (triple short Banks 5.67) est. upside targets 75 to 150 translates to an upside potential of 1300 % to 2600 % time frame: 10 to 30 wks Hi Nov 17, 2008: 202 Lo this morning 4.61.

    There are pretty good technical indications that the recent sucker rally topped this morning. Examples: Japanese Candlestick Chart with a “hang man” symbol yesterday. Plus a “key reversal bar” to the down side today. These two are ringing the bell to alert us that a major top should be in (prices not to be seen again in a long time).
    UNQUOTE

  • Rich May 13, 2009, 2:41 pm

    Aloha
    Used to attend these free hard money expos with Harry Brown, Doug Casey, Adrian Day, Paul Erdman et al, and agree with crowded frothy character at tops. Clearly we may not be there yet with the new cast of characters. Neither may we be at bottom or launching pad. Where is the desperation or disbelief? There are still far more silver and gold calves than gold and silver bears.
    Again cite COT stats showing Silver commercials double short and adding to shorts on strength, large traders triple short. Similar excess of gold shorts double the longs. Until these significant numbers reflecting the tracks of the big money reverse, the precious metals elevator/escalator may continue running down. http://www.cftc.gov/dea/options/deacmxlof.htm
    NEM or $HUI could breakout above 56.86 and 519.60 on the weekly. They are not there yet. Stocks can look ahead a year while a lot can happen in the derivatives and physicals meantime.
    Re COMEX defaulting, they may pay off in cash or change delivery rules if they can’t get the gold, platinum or silver. No big deal. Quasi government agencies like CFTA, FED, FNM, FRE, SEC default. The US Treasury Mint defaulted when it removed copper, gold and silver backing from US currency and coin and made gold contracts illegal. Presidencies also defaulted on the Constitution when they let European Central Bank usury funny money replace real money with value to take over the American economy.
    Re speculative flight from a dollar losing AAA status into silver and gold, most big capital market folks, including the late Milton Friedman and previous Fed Chair, confessed a hard time imagining $12 T in Treasury Debt stampeding into $40,000/oz gold or higher silver. They may continue moving into dividend equities with higher interest rates and lower P/Es for awhile, until the golden/silver/copper caution light bulb goes on again, maybe this fall. We may have more bankruptcies, defaults and deflation at least until then.
    Regards*Rich
    http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID3251493

  • Corey May 13, 2009, 12:35 pm

    Rick D., although I agree that prices WILL GET TO WHERE YOU ARE FORECASTING, you are way to bullish too fast. Keeping in mind that “da boyz” have unlimited amount of money to keep supressing the price of metals for the near future. Look for silver to only hit $25 within the first six months of 2010, not 2009. I hope to be wrong and Rick D. to be correct!!

  • Paul May 13, 2009, 10:54 am

    This is exactly why I try to shut out the ‘noise’.

    Rick Dudley:
    “…BY THE END OF JULY OR END OF AUGUST. THIS PROJECTS SILVER TO 32-35/OZ…”

    Ben:
    “…I am seeing signs of a near-term top in silver…”

    I see people clamoring for the latest report, the new XXX that will help them make a million. I see people claiming ES to 12k, or 3k. GC to 500 or 5000.

    You can ask 10 people and get 10 MASSIVELY different targets for most vehicles. Each could be massively wrong and yet we continue to plead for others to provide targets, patterns, guidance about where the markets are headed.

    As a technical analysis trader I try to remember one thing from Rick…it is a bouncing dot, nothing more. The reports, headline forecasts, newsletters, intra day chatter is nothing but noise that distracts from performing solid analysis on that bouncing dot.

    Bounce away little dot…

  • ben May 13, 2009, 6:08 am

    I am seeing signs of a near-term top in silver. The bottom of the silver market a few months ago witnessed any product other than 1000 oz bars going at 25% (generic rounds)-50% (Eagles) premiums over spot. Right now Eagles can easily be found for a 15% premium, and most other product is under $1 an ounce over spot.

    As for the long term…I think the 11.2 trillion dollar federal debt, that is growing by about a hundred billion a month can lead to no outcome other than hyper-inflation and much higher metal prices. This past April witnessed the federal debt increase by over a hundred billion. For most years that I checked out, April was the one month in which the federal debt was stable or decreasing because of tax revenue. I expect subsequent months this year to even be worse than April, because there will be no tax receipt windfall.

  • Terry S May 13, 2009, 5:37 am

    I totally believe you, Rick D – Also, I’m NOT expecting anything different this year from previous ones: Summer doldrums for precious metals; gold especially hammered to prop-up the dollar; and the GATA anthem = “there are no markets, only interventions.” Still the indomitable optimist in me hopes otherwise. ps. One has to be a little schizoid to stash kilos of metals while aboard a sinking ship.

  • RICK DUDLEY May 13, 2009, 4:06 am

    THE SAME 2.618 WAVE-COUNT THAT TOOK GOLD TO $1031.95/OZ. NOW PROJECTS $1,600.00/OZ BY THE END OF JULY OR END OF AUGUST. THIS PROJECTS SILVER TO 32-35/OZ.
    3 CLOSES ABOVE GOLD 1032 PROJECTS $3,500.00/OZ GOLD, AND 70-90/OZ SILVER.
    WITH DUBAI TAKING COMEX SILVER OFF THE MARKET, IT SEEMS LOGICAL THEY WILL MAKE THEIR OWN SILVER COINS AND DEMAND PAYMENT FOR CRUDE IN THAT CURRENCY.
    TREASURIES SEASONALY TOP IN NOVEMBER-DECEMBER, AND I EXPECT INTEREST RATES TO SOAR, AND GOLD AND SILVER TO TRADE 3500/70-90 WITHIN 1 YEAR FROM NOW.
    INVERTED H&S ON GLD WEEKLY.
    EXPECT TO NEVER SEE SILVER UNDER $14.00 THE REST OF MY LIFE. SILVER AT $14.34 IS THE BUY OF A LIFETIME. (BEEN TRADING SILVER SINCE $1.90 IN AUGUST 1971)COMEX RUNNER.
    ALSO, IT IS BETTER TO BUY SILVER ON THE dUBAI EXCHANGE WITH A DUBAI BASED COMPANY SINCE COMEX WILL MOST LIKELY GO INTO DEFAULT.


Exit From This Page Back to Trades