As it became apparent around mid-year 2012 that the Fed would move toward a new QE
program, the bugz declared a long gold trade as a cinch way toward large profits. Their
timing was exquisite as gold was sitting at very formidable support around $1550 oz.
Gold did take off as predicted, but has run into headwinds lately.
My monetary indicator for gold was negative a fair portion of the time since mid-2011,
but is now turning positive as the Fed is beginning to fulfill its promise of large open
market purchases of MBS. The gold market got nearly a five month jump on the new QE
program. My economic indicator has been in a downturn since spring 2011 based upon
an ongoing deceleration of global current $ industrial growth. This indicator has yet to
turn to the upside and has been a drag on the gold price since mid-2011 when downward
momentum firmly took hold.
the US dollar was widely expected to begin another decline on expectations of the new QE
program. It did so starting in early July this year, but has begun to firm up again in recent
weeks despite the generous QE operation the Fed has finally initiated. As the gold price chart
linked to just ahead clearly shows, the positive turn in the US dollar has chilled the gold
rally. $GOLD Chart ($GYX in the chart is an industrial metals composite.)
The US$ has surfaced as a "big dog" in the current uncertain environment which features the
fiscal cliff and election still ahead for the US, toubles and disagreement among the usual
suspects in the EZ, and no lift off in China, where the communist party is set to expel the
most prominent communist in that fabled land. So, the widely heralded large gold price
bonanza has been put on hold while the big dog US$ calls the shots. Note too, that the US
stock market rally has also been shelved since the dollar starting barking.
- Peter Richardson
- 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 !!!