03/09/2010 by Philinje.

This morning’s NFP said job losses were not as bad as expected, and job gains in the private sector were slightly larger than expected.

The immediate result was a spike in risk appetite and and decline in gold. The dollar moved down and the Yen pairs moved up but have drifted down again. Even though oil fell, CAD is up against the dollar. And even though gold fell, AUD is up against the dollar and Yen.

Gold has bumped up against its recent all-time high this week, but it now looks like that level has been rejected. We could be in for a decline that’s signficant, though it’s too early to tell. Silver, on the other hand, is holding up and this week almost got to its last high near $20.

Considering that silver is especially vulnerable to manipulation, thanks to a highly concentrated and obscenely large short position by two banks, it seems to be holding strong. However, this may be due to the current sense that the economy may be ok, as seen in the new rally in equities. The S&P broke above 1100 this morning but has since drifted lower. That level could be a high-water mark in the months ahead. Or maybe we have a real rally unfolding.

One roadmap of the near-term future is as follows:

Equities stage a minor rally for a week or two. Then they fall again, and a market event - black swan, if you will - causes a big decline, scaring everyone into thinking about deflation. Gold may go down in that wave. Then the Fed announces full-blown Quantitative Easing, round 2 (or 3 if the current half measure is round 2), and that causes some move up in equities. But the dollar, after spiking in the crash, then drops like a stone and gold starts its final run to the heavens.

I kind of hope it plays out that way because it would be an excellent way to ride gold. But this is conjecture. The dollar is weak enough right now, and yet again we see gold dropping against a rising Euro. So we may see gold act as a safe haven during a general crash. And then, there may be no crash and equities conclusively prove they are on the recovery path.

Summer officially ends on Monday in the US. Then traders are back to work in force and volumes should pick up. The rest of this month should be interesting. The true reality should be evident soon.

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26/08/2010 by Philinje.

Analysis that I read seems split on the near future of gold. Some see new highs coming right up. Others see an imminent drop. Certainly price action has been impressive this week, especially in silver, and in the face of options and futures expirations (today and tomorrow).

Today gold is dropping with a rising Euro, so again, my theory about the influence of the Euro on gold is being affirmed. Gold got to $1244 earlier today, and it still hasn’t approached the last all-time high at $1260. But maybe it will shortly. Silver spiked past $19 and might get past its recent high of $19.86, but this kind of behavior has in the past couple of years preceded a sharp drop.

So all in all, we might be near a short-term top. Or maybe we’ll get a little past the highs and take a breather. One thing for sure is that the summer is almost over and there has not been a serious decline. September is typically a strong month. It seems like buying power is strong.

To put all this perspective, here is a great article on the big picture:

http://www.caseyresearch.com/editorial/3614?ppref=CRX192ED0810D

I agree with this author. If gold drops to $1100, that ain’t such a big drop in the scheme of things, and it’s getting less likely. If it drops to $1000, time to jump in big time, but we may not get the chance. Anyway, a difference of $100 in the price is a small difference in the big picture.

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16/08/2010 by Philinje.

Gold hit $1220 today in Asia and the Euro is bouncing, causing Euro gold to level off near 950.

We might see a bounce here in the Euro but chances are it will head further down before we see a significant short-term bottom. It got to 1.2730 or so and might get to 1.25.

Here is a great article on the near-term picture for the dollar, silver and gold:

http://sunshineprofits.com/commentary/13-aug

Note that there is a warning in this article of a short-term decline in precious metals at the end of August. This author also sees the dollar and gold moving up together, though the relationship is unclear. My theory is that these days a breakdown in the Euro causes gold to move strongly higher - less so in dollar terms but still to some degree.

Interesting news: a state in Malaysia has begun to use gold and silver coins as legal tender:

http://www.google.com/hostednews/ap/article/ALeqM5iSb9KMh7TzPxrCK2wi5JlhutZdhAD9HIE6K80

There could be more stories like this in the months ahead. It’s interesting that the use of gold as money is part of Islamic tradition.

This week we could see a near-term top in precious metals. And maybe we just hit it. If the Euro bounces hard here, gold could drop, but chances are the Euro bounces mildly then drops some more, and that could be the top in gold until we get through any coming crisis in the markets.

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11/08/2010 by Philinje.

Looks like the markets voted with a big vote of no confidence.

The Euro took a big slide, sending Euro gold almost to a higher high. That could be more support for a new uptrend in gold. Silver is not doing well, because of its commodity-like nature, but dollar gold is holding up ok because of the rally in Euro gold.

Many analysts are noting that the rising bearish wedge in equities has been broken to the downside. We could get a bounce after today but chances are a major new downtrend has started in equities.

Gold might be ok for a while, and might even rally. Tough to say just yet. In dollar terms it’s hovering around the $1200 mark. I still think there is potential danger lurking toward end of this month. But this definite move down by equities could change the picture.

More soon.

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11/08/2010 by Philinje.

A bunch of bouncing yesterday from the FOMC policy statement. The dollar was charging up prior to the announcement, possibly because traders anticipated a new start to Quantitative Easing would rip the floor out from under the dollar.

The Fed decided to keep QE limited for now. I read some smart commentary a few days ago that gave compelling reasons why the Fed would not launch a new round of full-on QE at this time. This would give the rally in equities a little more room, and bonds bounced even higher on the news.

The end result is mixed. There were tepid bounces in gold and the Euro, but the Yen pairs look slightly worse off, meaning risk aversion is still hanging around, if not a bit stronger. The dollar dropped then bounced up. Equities got bought, again on low volume, but could not close up for the day.

The next few days will be interesting. Either buyers come rushing back in to push equities higher, or a general lack of confidence will gain strength. With gold we may have seen the top that was expected Monday-Tuesday, and now down to what may be a higher low. Or it could catch a reflation bid along with equities, if buyers come back in.

The one thing that seems likely is the dollar has started a bounce and bonds are still strong. On the whole, that doesn’t sound gold-positive in the short term. But keep in mind that once bonds start to drop, gold could move up in a hurry.

Here is an interesting piece on JP Morgan in the mainstream press. Maybe the show is ending for these guys, if public opinion really starts to notice the shenanigans going on at the expense of Main Street.

http://www.huffingtonpost.com/janet-tavakoli/jpmorgans-losses-from-ind_b_676042.html

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10/08/2010 by Philinje.

James Rickards is an unusual analyst who is known for assessing geopolitical macroeconomics with a relatively scientific edge. Check his assessment of deflation vs hyperinflation - a very useful summary with portfolio recommendations at the end:

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2010/8/9_Jim_Rickards_-_Portfolio_Recommendations.html

It looks like gold topped yesterday and is heading down as the dollar moves up in anticipation of the FOMC meeting. There could be some big moves this afternoon NY time.

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08/08/2010 by Philinje.

As I’ve been noting, the Yen pairs have all been struggling, despite the Euro pushing higher. That says risk aversion is still rampant.

Now take a look at this article:

http://www.gold-eagle.com/editorials_08/summers080410.html

Yields on 10-Year Treasuries are still dropping. In fact, they are near the levels they were at during the worst part of the 08 crash. And as one of the charts shows, Treaury yields have diverged from equities very significantly during this latest rally.

Be very careful. It wouldn’t be a surprise if equities have turned the corner or will shortly and head into a new bottom this October. What that means for gold remains to be seen. It’s possible with de-eleveraging we could get as low as $900. But gold has been consolidating at high levels and the 200 DMA is already at $1150. Hence, I go back to my assertion that $1040 to $1000 may be the lowest we see.

And we may see another pop up in gold before a general crash takes over. That only matters to traders, and with gold, trading is not recommended.

Let me just repeat my usual disclaimer: the decisions you make with your money are your own. This blog is not intended to be financial advice or trading advice. My goal is to present a viewpoint on markets generally and gold in particular. That viewpoint is an opinion only. You are responsible for what you do with your money.

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06/08/2010 by Philinje.

The disappointing Noon-Farm Payrolls report today has pushed the dollar toward 80 and gold has broken above its last high of $1204. It seems to be resting at $1206 and if it can close above $1204 today, it will be back in an uptrend.

So chances are next Monday or Tuesday will be a top, not a bottom, and then if gold comes down and holds above $1160, it will be fully confirmed in a new uptrend. Let’s see what happens by end of next week.

The good news today is that gold is clearly acting as a safe haven. The dollar is not. The US economy is definitely in question. If things get really ugly, we might see the dollar go up, but maybe gold will go up too. 

The Euro could be headed to 1.36, while the Yen is getting stronger. We are at levels now, though, where currencies could turn, and the dollar could bounce off 80. So I remain a bit cautious on gold as we enter the second half of August.

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04/08/2010 by Philinje.

People’s Bank of China made news recently with its new support for the gold industry.

This Bloomberg article talks about the potential for acquisitions by Chinese gold mining companies:

http://www.bloomberg.com/news/2010-08-03/china-plans-to-help-bullion-producers-expand-overseas-central-bank-says.html

Juniors miners are already a great target for acquisitions. Now China is jumping in to this area. Hmm…

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04/08/2010 by Philinje.

Here is a great overview of what could happen over the next year:

http://www.gold-eagle.com/editorials_08/connor080210.html

Note the author sees the dollar moving to 80 in the short term. He sees gold moving inverse to the dollar but I see a possibility that gold will move inverse to the Euro. Regardless, if the dollar goes to 80 and gold moves inversely, it will spike up now and come down later, or if gold moves inversely to the Euro it will fall now and move up later.

Personally, I prefer the scenario of moving inversely to the Euro because that means in a flight to safety gold and the dollar will move up together.

The longer term picture of early next year could be driven by an inverse relationship to the dollar again.

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