Well, cousin Bennie dropped his Taper Bomb yesterday and "risk off" returned with a
vengeance. This has been an excruciating couple of days for gold aficionados. The
market had been holding above shorter term support of $1350 oz. and there was a minor
rotation out of a correcting stock market back into gold which summoned some bullish
commentary even from non-bugs. But the Taper Bomb caught the gold guys too since
it suggested that not only were there strings attached to the QE program but that the Fed
could gradually reduce it to zero over the first half of next year. other fundamental
factors have not helped. The oil price was knocked down today and my cyclical gold price
indicator has remained flat on low global production growth and overcapacity. As well,
despite the big QE programs in the US and Japan, the CPI has continued in deceleration
mode since Sep. '11.
I closed out my shorts a while back down near $1350 and have not returned because the
gold price is heavily oversold near term at a better than 20% discount to the 200 day m/a.
Even so, today's sharp break of support indicates that the apparent second leg down of
the gold bear market could have further to run before the market stabilizes and sets up
for a more tradeworthy bounce. Bugs who want to add to positions might want to wait
for the market to put in a base which it tests rather than go in after a spike low since these
bounces have not held while the rallies that were generated have grown progressively
Daily $GOLD Chart
- 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 !!!