About Me

Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!

Wednesday, August 13, 2008

Gold Price ($833 oz.)

Gold remains in a long term bull trend. My macroeconomic trend
directional indicator confirmed it by hitting a new all time high a
few weeks back. Both the trend indicator and the price of gold
remain extended to the upside reflecting the strong rise in the
oil price and in industrial commodites over the past year.

The gold price shifted to a high return / high risk profile in early
2006 and remains in that mode despite the recent price correction.
The macroeconomic directional has declined sharply since 7/11/08
on oil and industrials pricing weakness and the gold price has
followed suit.

Gold is now in a steep short term price downtrend and recently
broke important pivotal support at $850. It touched $810 oz.
earlier in the week and is rebounding from a steep oversold,
helped no doubt by a bounce in the oil price. Gold needs to
take out $850 on the rebound to arrest the short run sell -off.

Gold remains in mania mode and needs to stay above the $770
oz. level to hold the high return / high risk profile. If I push the
macro indicator hard to produce a high value, I can come up with
a price of $760 oz. So, gold is still priced out of my league.

The metal has entered a strong seasonal period in an oversold
state, so expect the bugs and bulls to push hard to get you into
a long position. If my guess that oil may sell down to $90 bl.
by late this year is correct, my macro indicator is likely to
weaken further, which suggests to me that a powerful
seasonal rally in gold would be a highly speculative affair lacking
much fundamental substance.

I would like to see gold trade down in the $600 - 650 oz. area
before it would get me interested on the long side, but I do not
have a case for that now.

Interestingly, when gold did trade above $1000 oz. late this
winter, dealers and larger commercial jewelers saw a goodly
amount of supply come across their counters. I continue to
see a gold price above $1000. as bubble territory and have
been surprised there was no bandwagon effect when the
metal crossed that threshold. Gold chart here.

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