Mover Mike

Here's a followup to my Gold and Silver call on Feb. 24th. Take a look at the April Gold contract at TFC Commodity Charts. It shows a gap on 10/27/2005 and a close at 483.3. That gap coincided with a peak and a correction to 463.5 on 11/04/2005. After the gap was closed gold ran to 548.0 on 12/12/2005, a gain from the gap of $65.70.

The next gap was on 12/13/2005 with a close at 528.4. There was a correction to 497.0 on 12/21/2005. After the gap was closed gold ran to 579.5 on 02/02/2006, a gain from the gap of $51.10.

Now, our third gap took place on 02/06/2006 with a close at 574.3. IMO, the bottom was at 539.0 on 02/16/2006. As I indicated in my previous post, I believe we have broken out of a small head and shoulders bottom. If this move acts like the previous two our next high should be between 625.40 and 640.00, sometime in the first two weeks of April.

BTW, there are no gurus in the world, there are no guarantees. We all must think for ourselves. I just want to see if I can get it more right than the "bubbleheads" on TV, who get paid more than I do and are not accountable for their predictions.

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Gold economics Mover Mike

Update: Gold to touch $ 610 in near future: BBA

Though it is maintaining a constant upward swing, precious metal gold is still underperforming and is likely to touch dollar 610 per ounce in the near future, says an industry expert.

Here's the kind of advice you get from the so-called experts in the US.
From Reuters, Gold demand, prices seen easing in '06 - CPM Group

Investment demand for gold in 2006 is likely to decrease from last year's strong levels, as the rally of the last five years probably will slow after the first quarter, commodities consultant CPM Group said Tuesday.

CPM's managing director said in a presentation of its 2006 Gold Yearbook that the metal's bull run looks set for a pause and demand should taper off later this year. Prices consequently are likely to pull back later this year and into next, CPM's Jeffrey Christian said.

New York-based CPM's official 2006 gold average price forecast is $502.34, which is more than 12 percent higher than the 2005 average of $446.42.
[...]
But rising gold prices have sparked more mining exploration and development, CPM added. It projected mine production this year would rise 6.1 percent to 66.8 million ounces, with more gains expected in 2007.

Who is Jeffrey Christian?

Jeff Christian, Managing Director, CPM Group (Jeffrey M. Christian, who was the head of commodities research at J. Aron & Company, which was acquired by Goldman Sachs & Co), 30 Broad St., New York, NY 10004, www.cpmgroup.com, is the world's premier precious metals and commodities research and consulting company. It is independent of all mining companies, fabricators, bullion banks, and other companies that have commercial positions in the commodities markets, which allows CPM Group to have a completely unbiased view of these markets.

Now here's what the World Gold council said about mine production:

Worldwide gold production last year had the largest decline in 39 years, according to the World Gold Council said. Demand in India, the world largest consumer, rose 47 % last year, and 14 % in China, the world's fastest growing economy. The decline in output will likely continue for another few years simply because the industry didn't put money back into the ground when the gold price was languishing. And with demand surging everywhere those already established producers will benefit the most.

In June of 2001 at the AIME in New York, Christian acknowledges that gold has bottomed and predicts

Perhaps a range of $290 to $340 will be the new sustainable level.

In September, 2003, the question was asked of him in a roundtable

Q. The Gold to Silver Price Ratio has been up and down the charts, over the past twenty years. The ratio is calculated by dividing the price of gold by the price of silver. As we went to press, that ratio stood around 73. What should we expect in the near future?

Jeff Christian: The ratio is probably too high. We think that silver is a better investment, or has a better chance of price appreciation, over the next 3-12 months than gold does.

Drumroll Please!

Gold closed the next day at on 09/30/2003 $385.4. Do you know that it was May of 2004, almost eight months later before it sold lower than $385, at $372. Now he's saying "Prices consequently are likely to pull back later this year (2006) and into next."

Christian says the 2005 average of gold was $446.42 and is expecting an average of $502.34. That is not a very exciting prediction for the gold market that has entered, IMO, it second phase, the phase where the bullion banks go from short to long and encourage the specs with information like this to get short. I love averages. You could have one foot in the furnace and one foot in the ice box, but on average you are 70 degrees.

Gold is now outperforming most currencies. The central banks that were sellers are selling less gold and other central banks are indicating a need for more gold in the mix of reserves. Mining companies are struggling with higher costs for energy and steel and production will be done. In addition, it takes about ten years to bring a new mining discovery online.

They pay big bucks to Jeffrey Christian for this advice! For what?

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Update: March 05, 2006 SA gold output lowest in 83 years

The latest figures from the South African Chamber of Mines showed the country’s 2005 gold output fell 13% year on year to 342 tons.

“This is the lowest level of gold production since the 284.6 tons recorded in 1923,” the chamber said in a statement.

This is seen as an aberration, however, when compared to the average five percent decline each year in the previous decade, it said.

My, my, that didn't take long! Silver just went to a new high above $10 and you have to go back to 1981 to find Silver higher. Gold will soon follow!

You have to brain dead to see these prices and not come to the conclusion that something has changed.

Silver Gold economics

In Who is Jeffrey Christian, I quoted this highly paid consultant (CPM Group, spin-off from Goldman Sachs) saying the POG would average $502.34 for 2006, peak in April and:

Investment demand for gold in 2006 is likely to decrease from last year's strong levels, as the rally of the last five years probably will slow after the first quarter

This is the guy who said in June of 2001 at the AIME in New York that gold has bottomed and predicted

Perhaps a range of $290 to $340 will be the new sustainable level.

Now Reuters quotes him saying

Gold is likely to claw its way to a fresh peak near $600 per ounce over the next few weeks but the longer-term outlook is uncertain, Jeffrey Christian of consultants CPM Group said on Thursday.

So he is still calling for a peak in the 2nd Quarter. Do you know that Goldman Sachs is long 3,789 contracts that whose expiry is in April? Do you know that they are short a huge amount of contracts but nothing until December?

Christian is quoted as saying

Although gold prices should remain strong for a year or two, Christian does not believe in the "super-cycle" theory that says commodity prices can keep surging in the long-term due to heavy demand from China and India.

I don't know your definition of super-cycle, but 2001 to 2008 is a nice long cycle, one that the public hasn't really participated in yet.

"We've clearly seen a fundamental change, an upward shift in investment demand. The question is how long will it last," he said. "We're in a sixth year now (editors note: gold bottomed in 2001 so this is actually the fifth year), we probably have a seventh year to go, but do we have an eighth year? I'm not sure."

Who ever knows how long a cycle will last. The bear market in gold lasted from 1980 to 2001. The bull market in the Dow Jones average lasted from 1982 (some say 1974) to 2000.

A host of uncertainties in the world about stock and currency markets, interest rates and international politics would likely support gold prices in the next few years, but investors can also be fickle.

I don't see any of these items getting better any time soon.

"One of the things you have to worry about is the staying power of investors," he said during the briefing, sponsored by stockbrokers Noah Financial Innovation.

Oh come on Jeffrey. Have you ever worried about the staying power of investors in a rising market. Usually investors make the mistake of staying too long.

"People tend to see the price rise and assume it's going to stay. If you look at the history of these markets there's no reason to assume that... prices tend to fall faster than they rise."

Jeffrey, you just defined a bull market. Sharp corrections all designed to scare you and get you out of your position prior to it taking off again higher. A Bear market does the same thing in reverse. Sharp rallies that make you believe that the market has bottomed, then slow crashing again.

Again, they pay this guy big bucks for this kind of advice. Remember there is a 12,000 to 16,000 ton short position in gold. Goldman is heavily short gold contracts and doesn't want you to know what they are doing on the TOCOM, so they got the Japanese to change a tradition of openness that has been in place for over 50 years.

If you are a bullion bank, your job in the second phase of this gold bull market is to remain calm, move from the massive short positions to long, seek to minimize the bull market enthusiasm, and encourage the little guy to get short until he realizes he is screwed. If I were a client of the CPM group, I would ask, "Who are you working for, Goldman Sachs or me?"

BTW, who has ever heard of a analyst bearish after a breakout. The idea that this market could consolidate under $570 since the first of the year and then break out to $600 as Christian predicts, is a powerful bull market and not one to be sold. Last time gold consolidated under $450 it broke out and ran to $570. On take a look at silver. It consolidated under $8-$8.5 for a year before breaking out to a 22-year high of $10.30!

Here's a thought. Maybe Jeffrey still has contacts at Goldman Sachs and they are feeding him this load of crap and he doesn't know he's being played!

Jeffrey Christian Gold Goldman Sachs

Update:

Update:

According to Midas at LeMetropole Cafe,

The Gold COT report released this afternoon revealed the following:

*The large specs reduced their longs by a sizeable 23,447 contracts and increased shorts by 1,502 contracts. The Commercials increased longs by 6,751 contracts and reduced shorts by 12,664 contracts, also a big switch. The little specs increased longs by 2,259 contracts and reduced shorts by 3,275 contracts.

... more and more of the major trade gold shorts are quietly doing what they can do to extricate themselves from their positions.

In Jeffrey Christian Now Looks for $600 Gold by April, I said,

If you are a bullion bank, your job in the second phase of this gold bull market is to remain calm, move from the massive short positions to long, seek to minimize the bull market enthusiasm, and encourage the little guy to get short until he realizes he is screwed. If I were a client of the CPM group, I would ask, "Who are you working for, Goldman Sachs or me?"

In Come On Gary North, Strap 'Em On, I said

That's why the price of gold has gone up more that real estate since 2001. There is a massive short of 12,000 to 16,000 tons and it is not available at these modest gold prices. There are also many other reasons. To site just one, gold is now money and is outperforming most other currencies, and we just told the world that the USDs you hold are not good for "Buying American"!

Le Metropole Cafe GATA Gold Jeffrey Christian Gary North Finance

I have received an email from Jeffrey Christian of the CPM Group and I thank him for his response. He legitimately asks

Ask him how many years he has been long and wrong.

I have been long interested in precious metals and made my first purchases of Golden Star Resources (GSS) when it was trading in the $1 to $2 area in 2002 (see chart) and it peaked in late 2003 at $8.75. I did not sell any GSS, gold went thru a correction, lasting much of 2003, before breaking out again. You can see from the chart that GSS has not participated since the breakout as many larger gold mining companies have and coreccted back to $3.00. I own gold coins purchased in at an average cost of $423 in 2004 (see chart)and in July of 2005 moved IRA funds to First Eagle SoGen Gold Fund (SGGDX) (see chart). I am still long with a long term gold expectation of gold at $1650 and I've said that before this cycle is over gold will trade higher than the level of the Dow Jones Industrial Average!

Jeffrey Christian goes on to say:

The fact is that I have a superior track record calling the markets for gold, silver, platinum group metals, and a host of other commodities that dates back to 1980, when we began keeping records. Additionally, we have nothing to do with Goldman Sachs, which we left 20 years ago to set up as an independent research house, other than some people there buy our research and consulting services from time to time.

Those who believe that metals prices only can rise are destined to lose money. The reasons why people pay me for my advice are many. Basically, however, it is because they make or save money taking my advice.

There are many examples of how we have done well for our clients. I will bore you with only a few. When gold was $500 in 1980, we were warning mining companies and others to expect the price to drop to around $320. It did, by March 1982, and then went lower by June of that year. At that point we predicted a rebound to $400, which was achieved within six months. At that point, we predicted a retracement back to $320. It took until March 1985, more than two years, but it happened.

When platinum was on its back in 1984, I predicted the price would get to $680 by late 1986. When it did, and the whole world had turned bullish, I said sell. I did not turn bullish again on platinum until the first quarter of 1993, when I made a speech entitled "that was then and this is now" in which I explained why we had been bearish, on an interim basis, on all four major precious metals from 1988, 1987, 1986, and 1986, respectively, but then in 1993 were turning bullish.

Just one silver mining company client of ours that I will tell you about took our advice in 1987, when silver prices ramped sharply higher for a brief period, and hedged 'as much as it dared' based on our analysis (not opinion) that silver prices would rise sharply in early 1987 and then blow off to low levels and not attain $7 or higher for many years to come. That company made tens of millions of dollars on that hedge.

My response that I emailed to Christian in part says:

I was merely pointing out that you are one of the commentators that has been quoted in the press, who has been getting the PM market wrong in the last few years and should be held accountable. Many make predictions and recommendations, but regardless of their track record, keep getting asked back to make more.

In your case, we have experienced a market that is up substantially since 2001, and yet your comments kind of give it a yawn, and you now decide that a breakout to $600 is in the cards after saying the average would be $502.34. If I were paying for your advice, what would have kept me from hedging my production all the way up. Barrick and Placer Dome have hedged some of their production and are off side by a total of $4.5 Billion!

One final comment, you have a reputation as you pointed out for correct calls up to 2001, I notice you are not pointing out correct calls since 2001. Maybe, you have a bearish worldview of precious metals that works well in a market that was bearish for 20 -25 years, but doesn't work in a bull market. Maybe, something has changed since 2001, that does not compute in your old paradigm. Maybe, gold has been held down central banks and bullion banks, and now are running out of supply. Just maybe, they are short 12,000 to 16,000 tons of gold that is not coming back at these prices. Maybe, forex reserves in many Asian countries are heavily over weighted in USDs and underweighted in gold and they have decided to readjust the balance. None of that analysis is reflected in your tepid remarks on precious metals.

Jeffrey Christian precious metals Gold Finance