Elliott Wave newsletter today regarding Gold valuation
Submitted by rosenfeldp on Wed, 10/28/2009 - 08:30I received today's EWI Independent and was immediately grabbed by the headline: "Is Gold the Bargain of the Decade? This Chart Cuts to the Chase." What I saw was a chart that showed the value of Gold (in dollars) vs. the value of the dollar today against what it was worth back in 1913. The value of the dollar had tanked over the last century, while the value of the gold had soared since being decoupled from the dollar.
No one here should be surprised at the content of this chart... if nothing else it shows WHY you might want to have gold instead of the dollar.
Amazingly, this article, written by Nico Isaac, goes on to say that since 1913 the dollar has declined in value to about $0.04, and gold has risen to $1071. The articles assertion is that the dollar has essentially fallen by a factor of 25, while gold, having been valued at $20.67 in 1913 has risen by a factor of 50, THEREFORE, GOLD IS OVERVALUED! HAHAHAHAHAHAHAHAHAHA!
Really! That is the assertion! What buffoonery! NEVER MIND THAT THE $20.67 WAS A GOVERNMENT FIXED PRICE! NEVER MIND THAT for 50 years in this chart the price of gold is flat... that there was NO free market in gold. His assertion is that gold was ONLY worth $20.67... but what would gold have traded at in a free market over those many years? No one knows. The whole basis for this argument is that gold today is valued proportionally higher than the devaluation of the dollar over the same period. AS IF GOVERNMENT MANIPULATION OF THE MARKET SHOULD BE IGNORED!
There was no way to "Contribute" or "Respond" to this article on that site, or I would have also posted this reply there. This article will be used to damage the image of gold in the minds of those that don't understand its monetary values. I am not a Gold Bug, but I do believe gold holds its value better than the dollar. That is reason enough for me to value it as a hedge.
I just felt I had to put something out there regarding this article. Thanks for your attention!
Why So Angry?
Gold is near it's all-time highs and virtually everyone on the planet is in agreement that it will continue much, much higher. One man (Prechter) publishes an opinion which is contrary to what everyone else believes and he is attacked for it.
People with strong convictions about the validity of their beliefs tend to be a bit more compassinate towards those whom they believe to be hopelessly ignorant of something which appears so obviously true to the vast majority of people. Shouldn't you feel a bit sorry for Prechter and his poor subscribers who are missing out on one of the best opportunities of a lifetime? (Just like all those adds on TV and radio say?)
Or perhaps the anger ihas more to do with the strength of the emotions accompanying human herding. The crowd just can't bear to see anyone stray too far from the herd. It makes them feel "uncomfortable". because it allows doubts to creep in. If you understand Prechter's full argument and have rejected it because reason compels you to, then there is no reason to be so harsh towards him merely for expressing an opinion. If you disagree merely because almost everyone else does, then I can understand the anger, because it stems from allowing others to make up your mind for you. This is why the more vocal Prechter's critics become, the more comfortable he feels about his forecasts.
EWI allows people to post questions and constructive criticism on their message board. Subscribe to club EWI for free inorder to access it. If they fail to post and respond to your comment on the board (if it is not of general interest) they usually send you an individual response by e-mail.
Actually, I never mentioned Prechter
I did mention the author of the article, Mr. Isaac. I am a free subscriber, and from my newsletter I linked through to the article on the site and see no way to respond. Though I don't usually feel EWI's articles often merit response. I like most materials I see there, usually.
I am an investor, a trader, and a long time contrarian, and I usually enjoy the perspectives I get in EWI, even if they don't agree with my own. The article seemed to present a specious argument. It bothered me that many people might see this article... and assume that this was Elliot Wave's position. I am thinking this was a "guest" article. I do not know if Mr. Isaac works for EW or not.
Not my intention to offend, appologies if I did so.
No Offense
And apologies for assuming your sarcasm was directed at Prechter. The article wasn't really his, but the gold/dollar chart and analysis were drawn from his ElliottWave Theorist published last week. It may not be so obvious to those new to EWI and the wave principle, but Prechter (via Isaac) was not actually arguing that gold was overvalued. He was subtlely demonstrating the inconsistency of fundamental analysis by pointing out one fundamental argument which contradicts the many other bullish arguments people are using to justify buying gold. His gold forecast is pimarily based on the chart pattern, sentiment indicators, and his deflation argument.
It's a technique EWI uses to draw new subscribers. Most people reject technical analysis, so sometimes it helps to point out the flaws of the fundamental approach in order to get people to realize how irrational the financial markets can be. The gold/dollar chart is therefore largely irrelevant to his forecast, So I would say that effective criticism of EWI forecasts is of the technical sort (pointing out alternate wave counts backed by other indicators, etc..), otherwise, as you say, thei opinions shouldn't merit any response.
Thanks for the feedback
I am not a long time participant in EW and I am not familiar with thier exact position on the markets and their forcasting techniques. In fact, it was exposure here at DP that started me looking at EW at all. In my trading experience I use Fundamental, Technical and Seasonal patterns. I probably do more technical trades though. It is my intention to participate in EW trainings of some sort... probably a self directed home study program. Possibly some of the formal trainings as well, and this article did not change that. :)
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The current downdraft is
The current downdraft is simple end of the month selling as futures contracts are rolled over to the next month. I'll be surprised if it lasts beyond friday afternoon.
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Explain please. I don't get
Explain please. I don't get it. For every seller there's a buyer, and vice versa.
Silly calculations
Americans were allowed to own gold beginning in 1975. Gold traded at $160/ozt. According to ShadowStats, that was worth $1929 in today's money. Using the government's phony baloney CPI deflator, it comes to a mere $742.
Lots of negative gold articles
are popping up everywhere. Back in 2006 when gold hit $600, Fortune magazine wrote a piece warning about buying that high. They were a bit premature because a couple weeks later it hit $700, and yet another warning article was posted.
They still don't get that gold isn't an "investment", it's an insurance plan.
The latest high of $1070 is a direct result of lack of confidence in fiat money, banks and governments in general. If and when confidence erodes further - it will go higher.
Good stuff
Thanks for the post. I agree with michaelmalak, bad_karma and you in your assessments of the gold market. The other factor that I would add are the derivatives. As long as they are out there, a real possibility exists that one of the big derivative player could start the dominoes falling by defaulting.
More than ever, I think we should value investments that eliminate counter-party risk. Assets that become another entities liability add risk that is hard to be properly compensated.
I sold some gold at $1050 and think it's going to drop under a $1,000 which is going to be a window of opportunity to buy again. The next gold run will top $1,100.
END the FED before it ENDS US
END the FED before it ENDS US
I am with you... I would
I am with you... I would love to see gold go down to 800.00 again and silver back to 8... I will have a few extra bucks in Janruary to buy...
A prudent man foresees the difficulties ahead and prepares for them; the simpleton goes blindly on and suffers the consequences. Proverbs 22:3
"Mischief springs from the power which the monied interest derives from a paper currency which they are able
A prudent man foresees the difficulties ahead and prepares for them; the simpleton goes blindly on and suffers the consequences. Proverbs 22:3
Matthew 10:34 Think not that I am come to
send peace on earth: I came not to send peace,
but a sword.
hard to see silver losing
hard to see silver losing half its price in dollars, I think all PM's will spike after friday as two things occur.
a) future contracts come due
b) one of the largest us debt sales ever happens (or tries to happen.. )
“One of the penalties for refusing to participate in politics is that you end up being governed by your inferiors.” Plato
“One of the penalties for refusing to participate in politics is that you end up being governed by your inferiors.” Plato
Seems to me Silver was over $40 for a short time
a while back... perhaps two years ago or so? It subsequently fell to the low teens and has hung there the last year or so. Perhaps there has been too much supply.
LOL Over $40 NO
It was over $20
you could be right.. it
you could be right.. it will be interesting to see what happens..
A prudent man foresees the difficulties ahead and prepares for them; the simpleton goes blindly on and suffers the consequences. Proverbs 22:3
A prudent man foresees the difficulties ahead and prepares for them; the simpleton goes blindly on and suffers the consequences. Proverbs 22:3
Matthew 10:34 Think not that I am come to
send peace on earth: I came not to send peace,
but a sword.
CPI off by a factor of 2
The idea that the 1913 dollar is worth four cents comes from the U.S. government's official CPI numbers, which we all know are lies. The actual value is closer to two cents. http://www.shadowstats.com/alternate_data shows actual inflation centered at around 8% going back to 1990, as opposed to 4% for the official CPI numbers.
Good Point
I have heard that number before... if that is simply a government number, then you are right. I don't trust the CPI... However, even the good doctor (Paul) uses the $0.04 value when he speaks, and I have seen and read about this so often I did not consider the source of that value!
thanks for the article...
thanks for the article... eliot wave was saying gold was ready for a tumble a few months ago.. then gold went from about 930.00 to 1071 an ounce..
you are right, the gold and silver markets are manipulated.. for some reason prechter just can't get that figured out... if 1 or maybe 2 large us banks were not allowed to to own 80% of the short contracts, where would the price be today? on the other side of the elliot wave theory is a guy by the name of Alph Fields.. he claims at some point gold will be 10,000 an ounce using the same theory as Prechter.. very interesting!
A prudent man foresees the difficulties ahead and prepares for them; the simpleton goes blindly on and suffers the consequences. Proverbs 22:3
A prudent man foresees the difficulties ahead and prepares for them; the simpleton goes blindly on and suffers the consequences. Proverbs 22:3
Matthew 10:34 Think not that I am come to
send peace on earth: I came not to send peace,
but a sword.