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lokgp
16th October 2009, 01:55 AM
Just finished working on this chart, I only have data from Jan 2006 up to September 2009. Its a good reference.

Can someone put in some analysis, views regarding this. What does it all means, etc... a summary of it.

http://img379.imageshack.us/img379/70/klseingoldounce.jpg

GoldChan
16th October 2009, 09:41 AM
this is the 1st time i see something like this.
if you could enlighten us on how you derive the chart probably someone can comment on it.


Just finished working on this chart, I only have data from Jan 2006 up to September 2009. Its a good reference.

Can someone put in some analysis, views regarding this. What does it all means, etc... a summary of it.

http://img379.imageshack.us/img379/70/klseingoldounce.jpg

lokgp
16th October 2009, 09:51 AM
I am pretty sure most of us has seen the Dow Jones divided by the gold price chart.

Assuming gold is the only money in the world. That shows how many ounces of gold needed to buy a share of Dow Jones.

In this chart, it indicates how much ounces of gold is required to buy one share of KLSE.

This chart is derived by using the current month KLSE futures closing price divided by our Malaysia benchmark Kijang Emas 1 Oz price.

One certain instance is that, we know we have reach a bottom of stock when the curve started rising around March 2009 when priced in gold.

If you have kept on invested in KLSE since Jan 2007 to Jan 2008, you will find that the money you store in share market erroded even faster by inflation - of paper money.

Amadan
16th October 2009, 10:32 AM
wow. good effort! It was something I was thinking of doing as well but just too lazy.

However...to get a better insight to the KLSE:Gold ratio, I'm afraid that you need track it a lot longer than 3 years. You might need to go all the way back to 1970. The 1:1 ratio for gold:Dow occurred only a few times in history. From your chart it looks like its about 1:4 at the highest. i.e 1 oz is worth 4x the value of our stock market. It also implies that gold is a much better bet than stocks in Malaysia.

GoldChan
16th October 2009, 12:33 PM
OK thanks for the info. lok


I am pretty sure most of us has seen the Dow Jones divided by the gold price chart.

Assuming gold is the only money in the world. That shows how many ounces of gold needed to buy a share of Dow Jones.

In this chart, it indicates how much ounces of gold is required to buy one share of KLSE.

This chart is derived by using the current month KLSE futures closing price divided by our Malaysia benchmark Kijang Emas 1 Oz price.

One certain instance is that, we know we have reach a bottom of stock when the curve started rising around March 2009 when priced in gold.

If you have kept on invested in KLSE since Jan 2007 to Jan 2008, you will find that the money you store in share market erroded even faster by inflation - of paper money.

GoldenFinger
16th October 2009, 01:20 PM
FUIYOH! incredible!....I think it would be more accurate if it was based on spot instead of Kijang Emas where the prices are manipulatable with premium charges that varies from time to time.

GoldChan
16th October 2009, 05:15 PM
FUIYOH! incredible!....I think it would be more accurate if it was based on spot instead of Kijang Emas where the prices are manipulatable with premium charges that varies from time to time.

there is no excel file for spot price in RM as far as I know. U got to take the rate in USD then correlated with bank negara forex statistic. Lot of work

GoldChan
16th October 2009, 05:23 PM
FUIYOH! incredible!....I think it would be more accurate if it was based on spot instead of Kijang Emas where the prices are manipulatable with premium charges that varies from time to time.

there is no excel file for spot price in RM as far as I know. U got to take the rate in USD then correlated with bank negara forex statistic. Lot of work


I wanted to sell yesterday 15th Oct at UOB buy-back price RM3622/= when goldenfinger yahoo me saying the spot drop to USD1050/= at 3:00 pm. But too much hassle and time. so didn;t sell.
UOB premium = RM85/-,
(petrol + toll + parking = RM10/- , time = 3-4 hours gone.) x 2 (cause U 1 2 buy back at lower price right)
If I stay next to UOB I could have sold 2-3 units.

My Prediction.
Gold may easily drop to USD1000/- + USD drop to RM3.2 / dollar within 1.5 month time. Until 15st Dec 2009. after that don;t know what. I could be wrong.
let see how other predicts.

Amadan
16th October 2009, 06:06 PM
Watch crude oil...

Just only ran up to 78 and playing catch up with gold...not the time to sell, I think.

GoldenFinger
16th October 2009, 08:02 PM
I am still holding on to it....Would not sell for another 3 years...unless I need the money that is. In fact I will buy more if it falls to 950 at current exchange rate.

lokgp
19th October 2009, 12:13 AM
Having the same thought as Amadan, I started working on a longer period chart. I am really suprised by the chart.
Here's the KLSE priced in Gold spot prices since January 1997 until 15th Oct 2009. This is as good as it get.
You may observe that KLSE is actually at the bottom right now. So, is KLSE overpriced right now? Maybe not. Maybe gold is overpriced at the moment. Observe that gold price at the highest signals the bottom of the KLSE stock market.
Maybe it is a good idea to lock in some profits now. Can we expect KLSE to fall any further? Maybe not. This is as close to the bottom as it gets. Doesn't this chart chagne your whole perspective about the gloom and doom?

http://img10.imageshack.us/img10/7938/klse1997tillnow.jpg

lokgp
19th October 2009, 02:31 PM
In response to py's request for better labeling, Oz and RM added to chart.

http://img207.imageshack.us/img207/7938/klse1997tillnow.jpg

Amadan
21st October 2009, 10:47 AM
Having the same thought as Amadan, I started working on a longer period chart. I am really suprised by the chart.
Here's the KLSE priced in Gold spot prices since January 1997 until 15th Oct 2009. This is as good as it get.
You may observe that KLSE is actually at the bottom right now. So, is KLSE overpriced right now? Maybe not. Maybe gold is overpriced at the moment. Observe that gold price at the highest signals the bottom of the KLSE stock market.
Maybe it is a good idea to lock in some profits now. Can we expect KLSE to fall any further? Maybe not. This is as close to the bottom as it gets. Doesn't this chart chagne your whole perspective about the gloom and doom?



It sure looks like gold is overpriced against KLSE right now, hmmmm...

A couple of scenarios.

1) USD and MYR join hands on the way to the abyss. Gold could be even more overpriced. KLSE even more underpriced.
2) USD craters and ringgit strengthens significantly against USD (2.0 anyone?)Hot money rush to our shores and KLSE skyrockets. Gold and KLSE rise together.
3) USD craters and ringgit strengthens significantly against USD. We go into deflation mode. Gold becomes cheap against USD but nobody has a job to buy any. KLSE tanks, but gold soars.
4) USD strengthens, MYR tanks. We go into inflation mode. Gold becomes expensive in MYR, everyone dumps gold in favor of paper. Gold craters, KLSE rises.

Any other possible scenarios? I'd love to hear from you guys. And thanks Lok, for the chart.

In the meantime, here's the Dow:Gold ratio over the past 100 years.

IMO, a couple of things could happen. Dow slide bounces off the purple line around now. It may be temporary before cratering below 1:1.

If it breaks through the purple line, I expect it to go all the way down to hit 1:1 and even below that by 2012.

But eventually, if you look at the past 100 years, the dow will rise again. At it's high, it took about 43 ounces of gold to buy 1 dow. Its about 7 oz's now. Whereas, it takes 8gms to buy the KLSE now. At it's high(according to Loks Chart), it took roughly 1.5oz.

http://www.freeimagehosting.net/uploads/aa41d0279b.jpg (http://www.freeimagehosting.net/)