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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 !!!

Tuesday, October 27, 2009

Gold Price

As discussed in the last gold post on 9/10, I pointed out that the
gold price needed to take out key resistance at $1000 oz. to hold
the uptrend in place since 10/08. This it has done.

The gold price was rambunctiously up over Q1 '09, but it could not
hold that action and has since settled into a more stable uptrend.
The negative price action of the past few days has taken some of the
froth off the market, but gold has not been dizzyingly overbought
now since a brief stretch in 3/09. I would rate it mildly overbought
at this time.

My gold price macroeconomic directional indicator entered a new
uptrend starting last December. It has been rising with relative
consistency and reached a new all-time high on 10/23, slightly
exceeding the previous high set in 8/08. The primary factor
behind the setting of a new high has been the strong growth of
monetary liquidity via the Fed's easing actions, but oil and industrial
commodities prices have also contributed significantly since the
early part of this year.

It is encouraging that gold and the indicator made new highs close
in time to one another, but I continue to see gold as carrying a large
price premium that I cannot account for through various techniques
of economic analysis. That premium is now close to $350 an oz.
It is clear that there is no shortage of folks who worry about the
stability of the financial system. But, I would also point out that
2009 has seen sharp advances for the other precious metals, so
there could be as much a cyclical element in gold's recent trend as
anything else.

At any rate, gold remains too rich for my blood, and I have been
happy to trade away from this market and will continue to do so
until gold finds a range closer to my idea of its economic value (now
a paltry $500 -550 oz.). Gold chart is here.


Rich said...

Gold is always good to buy when people can't stand the idea of owning it, which isn't now.

Anonymous said...

You can save wealth in recession if you have gold bullion.

Thanks for the great reading, we buy gold buy in a recession. I will pass this on to our Ira clients to read.