June is over and…

Well, in some respects it was disappointing. In other respects it was encouraging.

Let’s start with the bad news. Gold did not make a new high in May or June. And it basically slumped in a consolidation, not moving much either up or down. This is not entirely a bad thing.

Compared to 30 years ago, there was no big move up and then a consolidation in June; instead it was all one big consolidation. So it could be argued that the 30 year cycle is not playing out precisely, certainly not as precisely as it did in April.

However, it could also be said that $1000 is a big barrier, and now gold has gathered quite a lot of strength to break through for real. So far it has just barely broken through twice, and come back down again. One could see the current behavior as building up a head of steam to break through in a big way, and when it comes down that next time, it may stay above $1000.

That’s part of the good news. The other part is that on balance most signs are still positive and there has been no negation of the 30 year cycle.

At present it is looking like gold will continue to consolidate into mid-July. This might mean it could go lower, though the recent low at $913 may have been it.

The real support for a positive view on gold is the US Dollar, which is showing signs of tiring out from its rally during the second half of last year and into early this year. US Treasuries are also looking weak, very weak. The Quantitative Easing program initiated by the Fed, similar to the one adopted by Japan early this century, is taking its toll. This means the Fed is buying Treasuries to support the price and keep interest rates low, but recent action has shown this has caused a predictable loss of confidence in US Treasuries.

The dollar may rally in a market crash, like it did at end of last year. And there are signs that another crash is coming later this year. It is also becoming likely that equities will start sagging now after their recent run up. So it’s possible the dollar can move up for brief periods. But on the whole, the trend is down.

The other supporting sign is that gold has been trending up on a monthly basis since the big low last October. And the lows on the way up are higher than the lows on the way down. In general, it feels as if the ever-present forces trying to pound gold down are gradually losing their strength. When those forces finally give way, a mighty flood will break through the dam. That’s just nature.

So in summary, it’s not too late to jump into gold, and almost nothing has happened since April. I suspect a turning point is coming soon, but that may be very soon - like in a couple weeks, or relatively soon - like in a couple months. There may be a few more good opportunities to jump in, but not many.

Let’s see how gold looks toward end of July.

This entry was posted on 01/07/2009 at 04:32 pm and is filed under Gold. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response or trackback from your own site.

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