think tank, page-24

Reiner you might not want to watch this morning either! Another Fed comment on QE tapering and another market reaction. US markets fell as well. You need a few more days of significant falls in the US and then they might change their wording yet again. Slight changes in wording and markets react. Crazy.

Not that gold fell much further but the HUI caught up to the losses we had over the last few days.

Difficult to know if we drop much further today again or find good buying and close near even. Gold hit its low early last night then went mostly sideways for most of the night so who knows if it bounces from here again. Some guesswork from here might work as well as anything else right now. Sometimes moves look obvious and at other times you might as well toss a coin. You can get out and be thankful the next day or get out and wish you hadn't. At times like that I prefer to just hold my long term stock and when it's more obvious I buy or sell shorter term trades.

AUD gold is still near the upper end of its range over the last three months at 1434 so nothing has changed fundamentally to cause me to want to sell long term holdings. If anything the initial feedback on reduced dilution from trial mining is a significant positive.

U812. More guess work!
In the first GFC, POG only dropped 30% which was actually not much under the circumstances of huge fears of deflation, financial meltdown etc. It held up well and went on to new highs because many people didn’t want to hold much else. It had its traditional role as a safe haven. It will again.
It has already dropped by that much again off its 2011 peak and in global terms it’s near cost of production. It can go below that in the short term but not long term. Even with AUD falling as far as 50c, I see $1,000 as strong support both technically and because MANY major mines and even more mid sized mines will be shutting down in all parts of the world. POG will then have to eventually move back up at least to just above cost of production near current levels. $1,000 gold is not my expectation but if we see it and 50c, then we still have a record high $2,000 gold for our producers giving Aussie producers record earnings and plenty of dividends. A drop in gold to $1200 will still see many mines shut down because that is the average cost of production- roughly half the mines have costs above that level. That should be a natural floor. AUD at 75c and $1200 gives us $1,600 gold which will be a blessing and realistic. I think we have seen the lows for gold in AUD and I think it will go significantly higher from here. If they actually do taper QE in the near future, the possible outcomes are;
Gold actually goes up on short covering because it’s already more than priced in and it’s only tapering not an actual end to QE. Many forget that difference and just fret over the media hype.
USD climbs causing the AUD to dive partly because of the higher USD and because of fears of what tapering might mean for the world economy and therefore commodity prices. We should see a rapid move for the AUD into the 70’s and potentially lower in time.
So another potential outcome is that gold holds at least around $1300 and AUD 70c gives us $1733 gold. Or people eventually stop fretting about QE tapering, take a look at how many more dollars have already been printed, realise tapering is still more dollars being created even if at a lower rate of increase and push gold much higher while also selling off our dollar on low world growth and again we see record high AUD gold. Infinite possibilities, no one really knows which it will be but I think the most likely outcomes will see a significantly higher POG in AUD.