The gold price remains in a well established long term uptrend
which is supported by my macro and micro economic indicators.
Since topping the $1000 oz. mark in March, gold has diverged
negatively from the fundamental indicators which have remained
in uptrends. This is the first substantial such divergence since
the bull run for gold started in earnest in 2001. It appears to
reflect a pullback from a super extended position for seasonal
reasons coupled with development of an interim bottom in the
value of the US$ following the Bear Stearns rescue.
By my dim lights, gold goes into bubble mode above $1000 oz.
It is interesting that after topping that milestone, gold has
retreated instead of taking off. Well, despite the recent correction,
gold remains in mania mode nonetheless.
My macro and micro economic indicators are attuned to the gold
price as an inflation hedge. I do not include currency values in
the calculations. That would be redundant from an inflation
hedge perspective, but not so in the case of financial crisis, when
there may be flight from a range of currencies.
As of now, the fundamental inflation hedge oriented indicators
suggest gold should be at a new high. With seasonal commercial
demand set to strengthen, it will be interesting to see whether gold
can regain the high ground, or whether this current consolidation
process is a prelude to the discounting of weaker commodities prices
and lower inflation in a more sluggish global economic environment.
In this regard, a break in the gold price below the $850 level might
For a weekly gold chart, click here.
- 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 !!!