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Subject:  Re: Poll: Technical Analysis Date:  5/14/2013  5:20 PM
Author:  MDCigan Number:  17123 of 26147

From my point of view there are no fundamentals for gold:

- no revenues
- no earnings
- no cash flow


I will committ to this you don't have to remind me again. FWIW, I only used gold as an example of where my fundamental opinion diverges from the technicals. I wasn't interested in debating the fundamentals of gold nor was I interested in opinions on gold fundamentals as it was irrelevant to the point I was making.

Now since you brought it up, I will address it. I think there is a world of difference between an asset (something that has cash flows) and money. Obviously, gold is not an asset like a stock or a corporate bond as it doesn't have cash flows. Only a moron would claim otherwise. What gold just an alternative form of money/currency. Now it lacks the medium of exchange function so it has to be converted back to dollars or yen or loonies but it has the store of value function. Currencies don't have revenues or earnings or cash flow, but only an ignorant person would say that means there are not fundamental factors that drive currency values such as things like economic growth rates and PPP (purchasing power parity). Now there are some various fundamental models out there for gold. Interestingly, one suggests gold should trade around $800 while another suggests gold is undervalued after the recent decline. The difficulty is which model has greater analytical validity. Which one conceptually makes more sense? And which one fits the actual price action better since Nixon de-linked gold in 1971.

Even if one completely rejected the view of gold as an alternative currency as simply viewed it as a commodity used in jewelry there still would be fundamental factors such as jewelry demand and the marginal cost of new supply. All commodities from silver to oil to corn to coffee don't have revenues, earnings, or cash flows, but have fundamental factors that drive their pricing.
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