Harry Dent vs Mike Maloney on the price of gold

I just listened to a long advertisement in which economist and prognosticator Harry S. Dent predicted that gold bullion is in a bubble that will burst soon and may fall down to $250.

Compare that to Mike Maloney who created the Hidden Secrets of Money videos, who says gold is being manipulated low right now but will break free and soar to $5000 and continue higher as the dollar collapses.

The interesting thing about these two is that they both claim they are analyzing natural cycles.

I usually enjoy this kind of scenario--two respected men study the cycles and come up with opposite conclusions. But for this one, the stakes are so high that I find it more nerve-wracking than fun.

Is anyone willing to cast education-inspired mud on either contestant?
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Oops! I had Maloney's URL wrong. It's HiddenSecretsOfMoney.com, not of wealth. Excellent informational videos.

http://olagustafsson.com/wp-content/...ng-mud-big.jpg

Heres some for Harry Dent

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Originally Posted by KenJackson

I just listened to a long advertisement in which economist and prognosticator Harry S. Dent predicted that gold bullion is in a bubble that will burst soon and may fall down to $250.

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Dent is saying that gold will fall to a price that is far below the cost of production for every gold miner on earth.

He's welcome to say that, as long as I don't have to expend time listening.


The other guy (Maloney?) is trying to model something that is very difficult to model.

We don't know how markets behave when we can't even get information about the activity of the largest market participant, the US gov. and the corporations that do their bidding to implement the 'Strong Dollar Policy'.

It's obviously predictable that predictable & inevitable shortages would drive the price higher.


The discussion of 'how high' has to take into account manipulation. Which is basically conducted as a covert operation. They don't share all their detailed meeting notes.

So you're modelling something that is partially hidden.


Jim Rickards does a good job of currency modelling and also has an insider's perspective. (Very high level security clearance, etc.)

He has one exercise that is archived at King World News where he maps $ reserves and gold reserves and comes up with $8000 to $15000, that range.

However, he bases that work on official US gold reserve numbers. Which most of the members here suspect/ know to be false.


The desire to exit dollars has already started.

All the time, we hear sort-of-newscasts about the "hunt for a world reserve currency" - that don't mention gold, or silver. that seems wierd.

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Originally Posted by gunDriller

Dent is saying that gold will fall to a price that is far below the cost of production for every gold miner on earth.

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That alone is no refutation. If enough people wanted to get rid of their gold, the price would drop below the price of production because there would be no need to produce more to fill all demand. I guess that's what Dent is predicting.

Up until I heard his ad, I thought everyone was in agreement. James Rickards, Mike Maloney, James Turk, John Rubino, Michael MacDonald, Christopher Whitestone, Eric Sprott and Rick Rule, as far as I know, are in general agreement that there's going to be a currency crisis soon which will cause a rush of people trying to transfer some wealth into precious metals. This will drive demand way above supply and the price will go up.

So I was surprised to hear someone with a different view. And he appears not to be just a bum on the street--apparently a lot of people pay to read what he thinks. And you cannot deny that he's right that the shape of the curve of the price of gold looks parabolic up until 2011, just like the many other bubble curves he showed. (Even though he failed to explain how this bubble fell a little and leveled off while all the others suddenly plummeted.)

His certainly seems to be the more positive view--that we're not headed for a life-altering world crisis, but just a worse-than-average downturn in the normal cycle. But if that were true, it seems likely that more than one gifted economist would figure it out.

The price of paper gold depends on the supply of paper gold. What are the limits to the supply of paper gold?

In reality, predictions must take into account all factors that may hasten or slow the inevitable divergence.

The rush out of gold (mostly paper) will be precipitated by the collapse of credit as currency and the necessity to cover debt. The price of gold will plummet.

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Originally Posted by Carl

The rush out of gold (mostly paper) will be precipitated by the collapse of credit as currency and the necessity to cover debt. The price of gold will plummet.

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You keep talking about this collapse of credit, but I have not heard any reason for it to collapse. The cop in charge is the bankers and they don't seem to care much about standards in accounting. The Fed has an unlimited checkbook and buys the bankers instruments at the marked up value they put on them.

What will force the Fed to sell on the market?

i think we are trying to imagine things that may be difficult to visualize, partially related to lack of information.

it's like trying to do a GIS model of planet earth, but not being allowed to see the plat maps in some areas because of "national security".


i think one of the guides for precious metal valuations is, what they would buy in the past, when silver and gold were widely used currencies.

i think one of the yard-sticks for an ounce of gold is, a really good men's suit.

so, if we take Jim Rickards' $8000/ $15,000 estimate ($11,500), i wonder - is that how much a good men's suit will cost, if gold goes to $11,500 ?

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Originally Posted by gunDriller

i think one of the yard-sticks for an ounce of gold is, a really good men's suit.

so, if we take Jim Rickards' $8000/ $15,000 estimate ($11,500), i wonder - is that how much a good men's suit will cost, if gold goes to $11,500 ?

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Good question. I recall a professor during college teaching this very same thing many years ago. He said, historically, one ounce of gold will buy a man a nice suit. He advocated always having an ounce ready, so if you find yourself unemployed, you can buy a suit and go out and get a job.

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Originally Posted by gunDriller

i think one of the yard-sticks for an ounce of gold is, a really good men's suit.

so, if we take Jim Rickards' $8000/ $15,000 estimate ($11,500), i wonder - is that how much a good men's suit will cost, if gold goes to $11,500 ?

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we won't be wearing good men's suits. we'll all be in body armor.

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Originally Posted by Bigjon

You keep talking about this collapse of credit, but I have not heard any reason for it to collapse. The cop in charge is the bankers and they don't seem to care much about standards in accounting. The Fed has an unlimited checkbook and buys the bankers instruments at the marked up value they put on them.

What will force the Fed to sell on the market?

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What the Fed does or doesn't do, is irrelevant.

All it will take is for people/businesses/nations to stop accepting U.S. credit (a promise to pay) and demand cash payment.

Banks don't have the cash (none of them do) default, credit as currency ceases to exist as such and transforms into what it always was, bank debt.

For gold to be priced a lot less than the price of removing it from the ground is difficult to comprehend............


telling people gold will drop to one quarter the cost of production......

Judging by recent earnings reports, the average all-in sustaining costs for the industry fall between US$1,100 and US$1,200 an ounce. In other words, margins in the gold sector are incredibly tight for all but the top-tier mines.
http://business.financialpost.com/20...ounce-of-gold/


Gold Prices Below $1,200 Could Mean Production Cutbacks: World Gold Council

http://www.ibtimes.com/gold-prices-below-1200-could-mean-production-cutbacks-world-gold-council-1553008

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Originally Posted by Carl

All it will take is for people/businesses/nations to stop accepting U.S. credit (a promise to pay) and demand cash payment.

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I think understand what you're saying--businesses will fear that accepting credit cards will result in them not being paid, so they won't accept them.

But have you ever watched the crowd at your local big-box store (Walmart, Target, etc.)? Most people pay with credit cards. I was one of the last holdouts at the grocery store, preferring to pay cash because it just seemed wrong to buy groceries on credit. (One day the checkout clerk just stared at my proffered dollars for a second before she recognized them and said, "Oh! Cash.") So won't all those businesses fear loosing almost all their business if they don't accept the preferred mechanism of payment?

Back in the '80s, Exxon gave a discount for cash customers. That offended me so much that I boycotted Exxon. I guess a lot of other people did too, because I haven't seen any gas station or store give a discount for cash in a long time. Today, PM dealers are about the only ones that don't fear chasing away credit customers.

And an AWFUL lot of stuff is bought on-line at Amazon. How can they reject credit cards?

But in the end, how would this affect the price of gold?

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Originally Posted by KenJackson

I think understand what you're saying--businesses will fear that accepting credit cards will result in them not being paid, so they won't accept them.
But in the end, how would this affect the price of gold?

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The fall of the dollar is the obliteration of credit as currency, no one's credit will be accepted, anywhere. Demand for payment will be made on all outstanding debts, Wall Street and the banks will be the first to fail while trying to sell everything that isn't nailed down, to include gold, desperately seeking cash liquidity. They will be followed by governments and then everything else. Maybe two, three days max, their/our world as they/we've known it, will end.

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Originally Posted by Carl

They will be followed by governments and then everything else. Maybe two, three days max, their/our world as they/we've known it, will end.

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The world I knew has ended. Seems to have happened around 9-11.

But my Amex card still works.

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Originally Posted by Carl

The fall of the dollar is the obliteration of credit as currency, no one's credit will be accepted, anywhere. Demand for payment will be made on all outstanding debts, Wall Street and the banks will be the first to fail while trying to sell everything that isn't nailed down, to include gold, desperately seeking cash liquidity. They will be followed by governments and then everything else. Maybe two, three days max, their/our world as they/we've known it, will end.

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There have been campaigns to end the Fed with this sort of call for support by many others in the past and it has never happened.

It won't happen your way either.

I think the only way that the Fed is dumped is for a competing currency that is issued that presents a better value. Namely a gold backed currency out of the BRICS. Which is gold positive news. To the moon baby!!

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Originally Posted by KenJackson

But in the end, how would this affect the price of gold?

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Originally Posted by Carl

Demand for payment will be made on all outstanding debts, Wall Street and the banks will be the first to fail while trying to sell everything that isn't nailed down, to include gold, desperately seeking cash liquidity.

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OK, in that scenario, people and companies that own gold AND are in debt will sell their gold to pay their suddenly-due debts. There's some sense to that.

But how much gold is owned by entities that are in debt? Is this amount of gold bigger than the increase in demand that will result from nervousness? Is it larger than even China's voracious appetite for gold?

I can only see this causing a little dip. The predictions of a huge increase in the value of PMs seem inescapable.

But unanimity of opinion makes me a little nervous on top of my nervousness about the coming crisis, so I welcome your alternative view, Carl.

Is Gold Crash Proof This Time Around?

I’ve been receiving quite a few emails regarding the topic of Gold and how it will perform if another Crash hits. The following are my thoughts on this matter.

The first thing that needs to be said is that IF we have another systemic meltdown like that of Autumn 2008, Gold will likely go down along with everything else. There are simply too many big players (hedge funds, investment banks, etc) with heavy exposure to Gold who would be forced to liquidate their positions during a systemic collapse.

I know this is not what the Gold bugs want to hear, but during systemic Crises, just about every investment on the planet plunges while the US Dollar and Treasuries rally. Of course, this time around if another 2008-type event hits, it will undoubtedly involve or be focused on sovereign debt. So this raises the potential that Treasuries, particularly those on the long-end of the yield curve, could be hammered as well as all other assets outside the Dollar. This is worth keeping in mind for those who view Treasuries as a safe haven.

So if we go into a 2008-type event, Gold will fall. It will likely fall much less than other assets (stocks and industrial commodities), but it will still go down at least at first. This forecast is confirmed by the market action in 2008 as well as the market collapse from April 2010-July 2010. Both times Gold took a hit, but both times it came back quickly.

So if you’re heavily exposed to Gold, you’re going to need to think “big picture” or have a very strong stomach when the market Crashes.

Now, let’s take a look at the charts.

For starters, the number one metric you need to focus on in terms of determining Gold’s market action is the 34-week exponential moving average. Since the Gold bull market began in 2001, this has been THE support line for Gold.

http://www.zerohedge.com/sites/defau...C%208-10-1.gif

As you can see, Gold has only broken below this line ONCE in the last ten years and that was during the 2008 systemic collapse. So take a note of this line and always watch where Gold trades relative to it.

Indeed, a significant break below this line that DOESN’T occur during a system Crash would be a MAJOR warning that the Gold bull market is in trouble. Remember, the ONLY time we took this line out before was during the systemic collapse in 2008. So a break below it WITHOUT a Crisis would be VERY bearish.

And if Gold breaks below this line on its own (without a Crisis) and then fails to reclaim it… well, then it would be SERIOUS time to reevaluate the Gold bull market story.

Because of its significance as THE support line for the Gold bull market, the 34-week exponential moving average also serves as an excellent gauge for determining when Gold needs to take a breather or correct.

Indeed, anytime Gold has stretched too far away from this line to the upside, it has usually staged a pretty sharp reversal to re-test this line. I’ve circled the most significant episodes of this from the last seven years in red on the chart below.

http://www.zerohedge.com/sites/defau...C%208-10-2.gif

These are the BIG picture gauges and items to take note of: the points to remember in terms of determining where Gold is in its bull market and whether it’s an asset class you want to “buy and hold.”

Now let’s move into the more intermediate gauges and items relevant to determining Gold’s action from a trading perspective in the past and today.

Gold’s bull market of the last ten years has largely taken place within the confines of several very clear upward trading channels. Indeed, each “leg up” has featured Gold breaking above the upper trend-line of a given channel at which point said upper trend-line became the lower trend-line for the next trading channel (see below).

http://www.zerohedge.com/sites/defau...C%208-10-3.gif

As you can see, the first “leg up” in Gold’s bull market took place from 2001 to late 2005. At that point Gold broke out of its old trading channel and entered its “next leg up” which took place from 2006-until early 2008 when the Bear Stearns crisis blasted Gold into yet another trading range.

The systemic Crash in Autumn 2008 brought Gold back down into a former range (the only time this happened in the last 10 years), but the precious metal bounced back quickly. It DID have some difficulty breaking into its final “leg up” and staying there this time around, but by mid-2009, Gold was again on a tear entering its highest trading range yet where it remains today.

You’ll note that the clear significance of these various trend lines have made for some great trading: virtually every test of a trend line to the upside or downside made for a good exit or entry point for a short-term trade.

As I write this, Gold is trading in a well-defined range between $1,150 and $1,300. Going by Gold’s action of the last 10 years, we could see the precious metal continue to trade in this range for a while without breaking out either way. This, of course, assumes we don’t have another systemic meltdown AND that the Gold bull market has plenty of more room to run.

http://www.zerohedge.com/sites/defau...C%208-10-4.gif

The major indicators that could nullify this forecast are:

1) A break below the lower trend line WITHOUT a Crash
2) A break above the upper trend line that held

Regarding #1, if Gold broke below its lower trend line without a systemic “episode,” it would represent the first time Gold broke to a lower trading range without systemic risk. That would be a MAJOR red flag to watch out for if you’re a Gold bull.

Conversely, a significant break above $1,300 would signal yet another “leg up” has begun and would a MAJOR sign that the Gold bull market has plenty of more room to run.

A final significant move to watch for would be if Gold were to collapse into a lower trading range as a result of a Crash and NOT break out again. Even during the 2008 disaster, Gold was back to re-testing its upper trend line within a few months. So if another systemic Crash hits and Gold doesn’t bounce back quickly that’s ALSO a major warning sign that the Gold bull market is in trouble.

We’ve covered a lot of ground here, so I’ll close this article by listing the main points of this article:

1) “buy and hold” Gold investors MUST focus on the 34-week exponential moving average (currently $1,158). A break below this level WITHOUT a Crash is BAD NEWS.
2) Traders should focus on Gold’s trend lines for determining entry and exit points. Currently the trend lines are $1,300 on the upside and $1,150 on the downside.

A break below $1,150 WITHOUT a Crash would be a MAJOR warning to the bulls. So would a break below $1,150 WITH a Crash that wasn’t quickly followed by a strong bounce back and re-test of the upper trend line.

Good Investing!

Graham Summers

PS. to get more in depth market analysis and find out about a proprietary "buy and hold" trading trigger that has caught both major "legs up" in Gold AND avoided the2008 Crash, you can join me at www.gainspainscapital.com.

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There are simply too many big players (hedge funds, investment banks, etc) with heavy exposure to Gold who would be forced to liquidate their positions during a systemic collapse.

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The only thing I'll add, why would hedge funds, investment banks, Wall Street have heavy exposure to gold?
Watch CNBC...they all hate gold and always say gold is a losing proposition.
That only leaves central banks that are holding gold. So is the author saying central banks will sell gold into the next crash?

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Originally Posted by EE_

The only thing I'll add, why would hedge funds, investment banks, Wall Street have heavy exposure to gold?
Watch CNBC...they all hate gold and always say gold is a losing proposition.
That only leaves central banks that are holding gold. So is the author saying central banks will sell gold into the next crash?

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CNBC, really? You're joking, right?

Central banks don't own gold.

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Originally Posted by Carl

Central banks don't own gold.

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Technically, I guess The Fed (the central bank of the US) doesn't own any gold (source):

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The New York Fed’s gold vault is on the basement floor of its main office building in Manhattan. ...

None of the gold stored in the vault belongs to the New York Fed or the Federal Reserve System. The New York Fed acts as the guardian and custodian of the gold on behalf of account holders, which include the U.S. government, foreign governments, other central banks, and official international organizations.

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But the Fed says it stores gold owned by "other central banks", so some central banks must own gold.


BTW, that was a very interesting graph. But if it's a model of what will happen in the coming crisis, we can expect half a year of bargain gold prices before it jumps right back and resumes its ascent.