About Me

Retired chief investment officer and former NYSE firm partner with 40 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 !!!

Thursday, December 12, 2013

Gold -- Entering Low Test Zone

Back on Nov. 1, I posted that gold had failed to take out trend resistance at $1350. It
fell sharply afterward. Yesterday, gold could not take out down trend resistance at $1260.
They hit it again today. Since it has been in a bear market from the summer of 2011, and
since another year's end is just ahead, it is a case of "gold be gone" for some players as
speculative interest has been wrung out. Others may be concerned that QE failed to
generate faster inflation, and some are likely worried that the expected tapering of QE by
the Fed will eventually boost the US$ and create another low growth / nominal inflation
period.

Now, history shows that  PMs can be in a long term bear market but still have nicely
profitable rallies when cyclical pressures pick up. The global economy does have a strong
liquidity tailwind, the US leading economic indicators have recently accelerated and my
inflation pressure gauges have stopped falling. Now the global economy has been plagued
by weak demand growth and excess capacity. Somewhat stronger real economic growth will
put a little upward pressure on operating rates, and so there could be modest upward pressure
on inflation rates. I do not think we know if curtailing quantitative easing over a twelve
month period will harm the economy or not, but there is surely a chance for faster growth
in the interim and perhaps a revival of a degree of inflation pressure. Such should help
PM prices, perhaps enough for a good rally.

However, with "give up" selling in gold maybe still underway, I say let's see if gold can hold
support again down around $1200 and see further if the metal can rally through the down
trend line. Gold Weekly

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