How low can wheat go?, page-76

Most commodities are in a downtrend, including gold due to incredible USD strength of the last 6 months.

From a charting point of view IMO a long term chart is many decades, not just a few years, and that was my point really.

Prices trend in all timeframes and a chartist can really choose a timeframe to suit their argument, and this is where it gets complicated.

As a long term trader, I look at long term charts, I don't waste my time looking at anything shorter than a daily chart, but most of the time monthly and weekly charts of gold are my staple.

Longer term charts give you more information about price, so if a trendline is breached in a monthly or weekly chart it is much more significant than a breach on an hourly chart for example.

I wont go into too much detail about this now, as it will be a very long post.

We can agree that gold is in a downtrend and has been since 6/9/2011 when we look at the intermediate term trend.

Shorter term trend has been upward from the 1130 lows, but not enough for a technical bull market.

Gold was in a technical bear market as soon as it declined 20% off the 2011 top.

Gold will enter a technical bull market if it hits 20% above the low of 1130.

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Why the difference in sentiment between the 2 commodities?

For me sentiment is made up of a 2 main factors, fundamental and technical.

Fundamentally all commodities range in price from cost of production( and sometimes just below) to overvalued. When a commodity is overpriced, there tends to be an overproduction of that commodity(as we saw with gold in 2011) as the profit margins are massive. When commodity prices collapse to their cost of production, inefficient commodity producers go bust as part of a cleaning out process. In the case of gold mines are shut or put on maintenance and better quality deposits are mined until cost of the commodity increases(which is out of the control of miners)

Skols assumption about gold potentially dropping significantly to 700 could very well turn out to be right if
1. that is the true cost of production that allows the gold industry to survive
2. currency conditions are conducive to falling commodity prices(strong USD)


A large part of my more positive sentiment toward gold has to do with its recent strength vs the USD, this is a sign that, regardless of USD, it is still attracting significant buyers that are prepared to buy gold REGARDLESS of USD strength.
Wheat has sold off, so technically it is not as strong, and gold is outperforming wheat.

Another important difference is that wheat is a renewable commodity, where as gold is a precious metal, and there is a fixed amount that is available in the earths crust and oceans.

Another important difference is that gold has a long history of being a successful currency, and as you have undoubtedly notices we are facing massive global currency issues. 100 years from now gold will still be considered money, where as we don't know if the pound or the yen will be in circulation in their current form.

I cant finish this now as I have to go out, but if you are interested I will write more on this in much greater detail.