Wednesday, March 19, 2008

Gold Price -- Lunchtime Musings

Just a quick break from the workday to follow up on my last post.

In my last post, I pointed out that I had a "sense" that things were getting ready to "turn"....meaning the trends:

commodities higher
dollar lower
US financials lower
US stock market lower (in general)

...were all getting ready to reverse for a "pause that refreshes".

In light of the recent activity, I think we've seen that turn. Nearly all of the commodities have turned lower, the dollar bounced (slightly), US financials had a "snap back" rebound after the bear stearns news broke, and the US stock market had a powerful up day.

While I think that all of these "counter-trend" moves could carry on, I'm not willing to gamble on them anymore.

I'm moving to a "neutral" stance and I'm waiting like a panther to pounce on some of these things again. The only thing that bothers me is the speed with which this "snapback" took place. I was hoping for a couple of week move to cover the same ground.

I found a post backing my "sense" (at least in gold) that said that gold was ripe for a fall back to the bottom of an upchannel move down to spot 940 range. That was the number I was looking for, but given the speed with which we've fallen to that number, I'm not going to go "all in" yet....the counter trend rally *could* erase up to half of the previous gains from the recent move (and if something fundamentally shifts even more).

If we are lucky enough to have this retracement drag out a little bit longer to shake off some of the speculative "froth" in the gold market, it could set up for a very nice move upwards again.....for that we'd need to see the volatility calm down and the price of gold to move back into the back pages of the financial news rags.


p.s. the BIGGEST news (buried in the Bear Stearn debacle) was the fact that the OFHEO opened up fannie and freddie's ability to use their capital to loan out more money. in other words, from my understanding they *relaxed* their capital restrictions....again, in other words, from my understanding, they are letting them lever UP into a DECLINING market.

for the love of God this can only be a way for the investment banks hedge funds and other deer caught in the headlights to pawn off their crap onto an organization that is ostensibly under an implicit guarantee for taxapayers to backt them.

oh....p.p.s. fed funds rate is now 2.25 and i'm starting to go short the US financials again, regardless of what the technicians say. This bear market rally could last a couple of months but I believe another bank or banking institution will fail (probably more). At some point the federal reserve and the american people will run out of patience and balance sheet to keep propping them's ......GD part II.

1 comment:

Paul (dancep) said...

hey - great call on the countertrend rallies... I enjoy reading your posts on both the markets and Uruguay, as I am planning a trip for the month of April. Also hoping to help ROU become an offshore financial center... :)