Archive for 22/07/2010

Bernanke and foot in mouth

Looks like Bernanke did a masterful job of underscoring all fears about the American economy AND firing up the dollar by mentioning an end to accomodative policy.

It looks like gold took its cue from the end of reflation and dropped, meaning it is back to being a risk asset. So there goes the theory about inverse correlation with the Euro.

The main movement in markets at present seems to be into bonds and the Yen, and to some degee the dollar (probably being driven by purchases of US Treasuries). At this point, a bout of deflation in the US is being viewed as baked into the cake. Gold might not drop so hard, and might even bounce up a while longer short term, but it’s looking vulnerable.

The wildcard sems to be oil. It’s gyrating wildly like it wants to desperately move higher but then turns around a moment later like a schizophrenic. What a crazy chart. Maybe that’s an indication of how bullish sentiment is breathing its violent last gasp.

Anyway, if anyone is trading gold, which is generally not recommended, be cautious and there could be a good buying opportunity coming up. Selling some now or soon all depends on entry levels but having some cash on hand is not a bad idea as we enter the eye of the storm. In general, any core positions below or near $1000 are probably fine, so don’t bother trading.

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