Review of My Past Calls in 2006
Posted by Frugal on January 8th, 2007
When I first began blogging on this website, talking about various markets, I was always wary of mis-leading people and causing people to lose money. But I decided that I was just going to say what I believe in, and let you and the market be the judges.
In fact, my calls in 2006 were probably better than my own actions in rearview. This is probably one thing that will stay true for a long time, since my actions are a more timid and conservative version of what I believe in. Plus that I will not buy to skew away from my asset allocation plan. So there may be times that I may make a call, but my moves are correspondingly small due to my asset allocation plan.
Here are some highlights in 2006:
“My current price target is XAU 120 and HUI 280. I will most likely make some bigger moves when price reach that level. I don’t know what gold price will be when gold equity market reaches that point. It could be 610 or 580, or even 550. I’m guessing that around $580 is probably more plausible, but I don’t reject $550 as a possibility. My timeframe is goes from mid-June to late September. I am guessing that closer to mid-June is more likely, but only market will tell us in time.”
Actually, I’m a little amazed by what I wrote. Almost right on targets. Maybe I should start reading my own past posts more often, 
. HUI had its first bottom of 270.54 on Jun 13 (mid-June), and had its second major intra-day bottom of 274.72 on Oct 4th (late September). XAU’s first bottom was 119.11, and second bottom at 117.40, all on the same dates. I don’t know how exactly I came up with those numbers. But I’ve learned to rely on my trader’s intuition. And gold bottoms at around 540ish on Jun 13/14.
Overnight in Asian market, gold has broke thru $600 down to $590. It looks like $570-$580 is a definite possibility (I wrote this at 2am, and now it’s already $583), and $550 is looking more real these days. The million dollar question is of course whether this is the time to buy. My gut feeling tells me that the time is almost here. Yet I think this may not be the last chance in this year either. I think that maybe gold will rally temporarily for a couple of months, just to break down again to all the way back.
BOY! I was so right back on Jun 13. I can’t really believe it. And I wasted all of my emotions and missed opportunities riding through all the ups and downs from Jun to early October.
Overnight market, I had suspected that Asia may plunge to $540ish in panic. But this price probably will not be available in US (we shall still see yet), if my game plan works out correctly. My assumption was that an overnight plunging in gold spot will create enough panic, but still will not destroy ^HUI and ^XAU closing prices at US, and keep them at above the bull trends.
Yes, I was exactly right about an Asian market panic. Spot gold plunged to 540ish overnight, but that price was not available in US. I couldn’t look it up in Kitco’s historical gold price chart to say it was Jun 13 or Jun 14 since 540ish price was not available in US market.
Well, I hope you benefited financially last year by reading some of the posts here. I guess another thing that you probably have noticed is that I don’t post on the market that often, since my tolerance for volatility has been well-trained by the wild roller-coaster rides in PM sector since 2002. A daily swing of 2% is usually nothing to me, while maybe a sustained 15% move will finally strike my nerves. But I hope that by saying less, it would mean more everytime when I actually comment on the market. If you know something about Shannon’s information theory, a rare low-probability event contains much more information than a frequent event. You should always pay attention to the occurence of a rare event (in anything) such as Hindenburg’s Omen back in last April because they are always indicative and informative. I don’t think that my rare comments are of such quality, but at least that’s something that you should think about.
With gold & silver falling hard in the first week of 2007, my return from last year certainly has shrunk a lot. My current opinion is that PM will fall towards the end of Feb, and/or trade in a range for further consolidation. Physical markets of gold & silver should be seasonally strong before the Chinese/Lunar new year. I don’t think the physical markets will break new lows. Plus that I was told by an Indian colleague that in Nov/Dec of 2006, there are very few auspicious wedding days (Upper-middle Indian family buys/receives roughly worth of $30,000 plus in gold per wedding, I was told. Close relatives can easily give away $1000 to $5000 worth of gold). So presumably those backlog demands from last year would carry over to this year before Lunar New Year on Feb 18.
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