Posts Tagged ‘gold’
As many of you know, I’m not keen on the near-term prospects for gold at this juncture. The metal, while still viewed as a safe haven for some, is no longer on my buy list.
Yes, central banks are buying gold, but so what? The supply of the yellow ore continues to be ample, and demand really doesn’t appear to be doing anything.
In mid-April, I was bearish on gold when it traded at around $1,480–$1,500 an ounce. (Read “Is Gold’s Near-Death Crisis Over-Exaggerated? Concerns of a Market Meltdown May Not Be.”) And here we are two months later and the spot price is down 6.5%, while the S&P 500 has gone up about 3.7% during the same time.
Now I’m not saying that I would never be a buyer; I just wouldn’t be buying at this time, due to tough resistance and selling on upside moves, based on my technical analysis.
Take a look at the chart below. The first thing you’ll notice is the presence of a firm bearish “death cross” since late February, when the 50-day moving average (as shown by the blue line) crossed below the 200-day moving average (as reflected by the red line). Since the initial move, the gap between the two moving averages has widened and gold prices are trending lower.
Chart courtesy of www.StockCharts.com
The next developments you will notice on the chart above are the two successive descending triangles characterized by lower subsequent highs.
The first descending triangle materialized between early February and early April, prior to gold tanking on the chart, falling below $1,350. We are now in … Read More
The equity market and other capital markets are gyrating on the rise in 10-year Treasury yields. There’s been a lot of unusual movement in currencies as well.
Speculation regarding what the Federal Reserve is going to do about quantitative easing and the lull between earnings seasons are definitely factors.
There is always equity market uncertainty in the weeks before the end of a quarter (though the Dow Jones industrials have held up well). Investor sentiment reflects the collective ambiguity of whether earnings will hold up. In a sense, there’s not enough data to keep equity market speculators happy with their bets. When speculators can’t justify their positions, capital markets get cranky.
Both gold and oil prices have been bouncing off the weaker U.S. dollar. There’s always churn before a quarter ends.
I repeat my view that an equity market sell-off could occur at any time and that investors who are long should not be surprised by some pronounced downside (I wouldn’t sell Dow Jones blue chips).
The correction that both Wall Street and many investors expected did not transpire. The willingness of institutional investors to be buyers has been robust.
The equity market was led this year by a pronounced breakout in blue chips and components of the Dow Jones Transportation Average. It’s still very much worth following these companies and transportation stocks for overall market direction.
The Dow Jones Transportation Average is well off its high of 6,568.41, and this is meaningful. The retrenchment, while well deserved, is a sign that the rest of the equity market is ahead of itself.
Alaska Air Group, Inc. (NYSE/ALK) is down … Read More
In a fascinating work on long-run economic cycles, J. Anthony Boeckh’s book The Great Reflation offers up some poignant research on the U.S. economy and its cycles.
The Great Reflation is a non-political, historical breakdown of inflation, monetary and fiscal policies, interest rates, and long-wave economic theory. It was completed in 2010 and made several predictions on the U.S. economy that have turned out to be correct so far.
Boeckh, former publisher of the Bank Credit Analyst, delves into past financial manias, asset inflation bubbles, asset allocation for the aftermath, the U.S. dollar decline, commodities, and the monetary future of the stock market and the U.S. economy.
Here is a summation of Boeckh’s observations:
1. The global financial system will always remain flawed and subject to price inflation and bubbles, so long as it is based on fiat paper money.
2. Before 1914, most Western countries had a monetary regime that legally restricted central bank money creation based on its holdings of gold.
3. Average interest rates fell throughout the 100 years leading up to 1914.
4. In the absence of a financial system based on discipline and restraint, all anchorless fiat money systems (especially the U.S. economy) are destined to suffer inflation and instability.
5. Investors will be playing cat-and-mouse with the Federal Reserve for years to come—a problem caused by excessive private and public debt.
6. Deleveraging of the private sector bodes well for the transition process to the next long-wave cycle (2015+).
7. If the U.S. economy can’t help reduce the debt-to-gross domestic product (GDP) ratio in a timely manner, investors will face a public-sector debt supercycle … Read More
Economic conditions in the global economy are taking a quick turn in the wrong way!
Consider the Purchasing Managers’ Index (PMI) of the U.S. economy tracked by the Institute of Supply Management. Last month it contracted for the first time since November of 2012 and only the second time since July of 2009!
The PMI registered 49.0 in May, compared to 50.7 in April. (Source: Institute of Supply Management, June 3, 2013.) Any reading below 50 suggests the manufacturing sector is experiencing a contraction.
But it’s not just the U.S. economy that’s experiencing a contraction in manufacturing (and affirming the possibility of an economic slowdown). China, the second-biggest hub in the global economy, is seeing the same. In May, the Chinese PMI also showed contraction. The HSBC China Manufacturing PMI registered at 49.2 in May, compared to 50.4 in April. (Source: Markit, June 3, 2013.) Again, any reading below 50 suggests a contraction in the manufacturing sector—which happens to be China’s biggest industry.
Germany, the fourth-biggest producer in the global economy, has been seeing its manufacturing sector contract for some time now. The German PMI registered below 50 in May, the same month the International Monetary Fund slashed the country’s growth outlook in half! The German economy is expected to grow by only 0.3% this year, compared to 0.6% in its previous forecast. (Source: Wall Street Journal, June 3, 2013.)
All of this shouldn’t come as a surprise to Profit Confidential readers. I have been harping on about this issue in these pages for some time now: the global economy is on the brink of an economic slowdown.
Warning: … Read More
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