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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, September 10, 2008

Gold Price ($759 oz.)

Gold remains in a wicked downtrend, now trading about 27.5%
below the all time high of $1034 set in Mar. ' 08. It has fallen
out of the mania phase, as inflation hedge players leave the
market. The metal is quite oversold, but has yet to stabilize.
Old line traders would tell you it could fall to $700 0z. or
about 20% below the 40 wk m/a before coming to rest. But,
with a volatile play like gold, there's not much telling.

The gold price macroeconomic directional indicator has fallen
sharply since making an all time high on July 4. This weakness
reflects sharp sell downs of oil and industrial commodities. By
peaking at $1034 oz. back in March, gold correctly discounted the
rapid deceleration of key inflation indicators. The macro indicator
is close to a breakdown for the first time since early 2001. Since
it has been a good directional indicator for gold over the years, it
will bear close watching now.

In order for gold to break the long term uptrend, it would have to
take out $620 - 640 oz. in the weeks ahead. Cold consolation for the
gold bulls out there.

For now, I am interested in seeing whether gold can bounce from
its oversold condition back toward $800, which would signal that
that there are still aggressive players in the game.

gold as an investment turns interesting to me down around the
$600 - 650 area. So, it is still well out of my league. I will be
watching to see if gold does get pushed down 20% below its 40 wk
m/a to the $700 area. For a streetTRACKS GLD chart, please
click here.

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