As this was originally designed as a market profile blog here is my take on the Gold profiles.
Nov 30 short term low target MET today $1218 ....Jul09 Upprofile target MET ...Nov08 Upprofile target MET...Aug07 Upprofile target met - all between $1137 and $1200 ....£POG also had £700-£725 targets . As all of these profiles are balanced (demand=supply) there should be a reversion trade lower coming soon. There are no more off side shorts to fuel more buying from these levels. ALSO : Gold has been 100% correlated with stocks, has outperformed silver and the XAU, so shows worrying signs of speculative blow off potential. Why if it is an inflation hedge do bonds rally strongly as well? and if there is a crisis coming why aren't stocks in the tank? Or has it just been a liquidity hedge fund fueled buyathon? Food for thought ........Cash is King (for a while) .
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Bonds do so well? Fear. Flight to safety. Habit. When the US Dollar completely hyperinflates, all those holding long-term US Treasury securities are going to feel mighty silly and mighty poor.
ReplyDeleteStocks? Two points (1) They are effectively in the tank, against gold and they're only staying up because of all the quantitative easing. (2) At least stocks do represent real physical assets (usually). So mining stocks (particularly precious metals) will stay up, even with liquidating fiat money.
Buyathon? Yes! :-)
Though you're right. It is strange that so many people are still holding bonds. It could be a game of chicken, with no-one wanting to be the first out in case they end up being the last out. Also, remember many bonds are held by government treasury departments and government central banks, and there's two problems here. (1) The civil servants in the world's governments buying US Treasuries are doing it with OTHER PEOPLE'S MONEY or PRINTED MONEY, so they're not thinking too clearly with it, as there's no personal cash downside for them if it goes wrong (2) Civil servants are mostly dim and keep making horrendous mistakes, of which holding US Treasuries is going to be one of the worst on record.
Check out this interview - Denninger talks about either Bonds are right or Gold is right but which is it?
ReplyDeletehttp://misstrade.net/2009/11/karl-denninger.html
I traded US Treasuries from 1989 - 2006 & I can tell you it's a big sophisticated market that invariably gets the big picture right. I have heard & read the arguements for surging yields and hyper-inflationary fallout from overindebted US govt endlessly for 20 years. Remember Reagan arm's race and the surging deficits ? It was all going to blow up in the late 80s ...... this could roll on for another 20 years ....