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DcifrThs,
You seem to be saying that gold and silver are going to break down significantly.
Both are sitting at 1-year trend lines after being much higher. This is normally where buying comes in and shorts cover.
The long bond is rolling over a 27-year trendline. Normally that means traders see real inflation (in excess of govt estimates) and demand more yield to hold those bonds.
Normally this kind of action in the bond market torpedoes stocks and bond pricing. if stocks and bonds are trending south, what's left in terms of asset classes to park inflation-aware money? Certainly not cash or real estate now.
The worldwide liquidity explosion caused by the Fed's expansion of money supply (and competitive moves by other central banks) must find a home eventually. Where is it going to go?
Right here, long metals at the 1-year trendline, with a 3% stop has very favorable Sharpe characteristics.
Charts:
Gold ETF
http://stockcharts.com/h-sc/ui?s=GLD...;dy=0&id=0
Silver ETF
http://stockcharts.com/h-sc/ui?s=SLV...;dy=0&id=0
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first off, you need to speak english.
1 year trendlines?
27 year trendlines?
you do realize that now is the present and the coming time period is the future right? and neither are anything like the past?
"favorable Sharpe characteristics"
are you talking about risk vs. return (again based on past trends and a stop loss?? ) ? if so, then why not just say it...especially when we're talking about alpha generation (where the risk-adjusted-retur is called the information ratio) and not beta (where the passive risk adjusted return is called the sharpe ratio)
anyways, despite all the foreignese in yourpost, you ask 2 great questions:
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where will money go?
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and
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what is the current driver of asset prices?
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these are two aspects that i've neglected. since growth is high and capacity is tight, inflation will drive asset prices. when that is the case, precious metals tend to do well.
but at the same time, increases in global yields tend to be bad for precious metals.
overall, i think we are in new territory here as i just reviewed my long term charts (1960-2006) and we haven't seen a time like this yet where liquidity is widely available, stocks are at record levels, emerging markets are sustainably growing, inflation is still fairly contained (we're seeing bp or single % moves in the developed world) and bond yields are also moving by less than %s.
so overall i dont think right now is a time you want to use past trends to predict price moves. the global growth overall has pushed silver & gold prices up (as well as oil & copper) from about 2002-2007. EDIT: just to be clear, by runup, i mean absolutely unprecedented growth in oil, gold & copper (except when gold skyrocketed to like $1700 an ounce). the drivers of this have been the massive amt of liquidity (mostly for gold) and huge growth of emerging mkts while synchronized with every single developed country (copper & oil).
so i'd think that right now, despite the historic relationship between inflation & precious metals, a reduction in growth (or an increase in yields) will drive their prices down, not up.
the question is then, where will all this money go? well, i think some if it will structurally be withdrawn from the system. this is just what central banks do in order to raise interest rates (they sell treasury securities & take cash out of the system and simply hold it).
also, as rates rise, cash does become more attractive relative to gold & silver.
so despite the fact that i only understood about 1/2 of your post, i think i'm comfortable enough with your major points to offer the above explanation.
in short,
1) historic trends are not likely to apply right now (and tend to be a horrible way to trade).
2) growth slowing & yields rising imo are likely to now push prices of precious metals down, not up despite the fact that traditionally having inflation coming in above expectations increases demand for precious metals. in this case, i think the runup in their prices over the past 4 years (which has been HUGE), is going to turn the other way as growth slows & yields rise.
3) the liquidity that has been introduced via loose money will be at least in good part withdrawn from the system (literally) by central banks.
Barron