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Gold Showing WeaknessChris Laird First, before I describe why, I want to say I am a long term gold bull. I bought gold and silver bullion last week at higher prices than now because of my philosophy of buy and holding gold. I bought last week even thought it looks like gold could go below 600. I have this philosophy of buying gold regardless of local time price movement. So, please take this paper as research about gold, and don't now say "oh! Chris is a gold bear!" cause I am not. Yen-Gold The largest bearish force on gold temporarily is rising interest rates. I wrote several weeks ago that rising Japanese interest rates would be a suppressive force on gold going forward for the near term. As a matter of fact, I have written several times that when the BOJ raises this time, gold would drop $30 to $50 dollars from that point. On the Monday following the BOJ .25% raise, that exact thing happened. Of course, the week before, the India financial capital had 7 subway trains bombed, killing about 150 and wounding 500. Gold shot up then. Then our world fellows in the Middle East started a proxy war in the Middle East in Lebanon, with Hezbollah kidnapping three Israeli soldiers, and Israel going into Lebanon to clean out Hezbollah. That fracas raised gold about $30. Nevertheless, gold is now at 626. Gold has given back all of the flight to safety gains since India and Lebanon within a week of those latest events. Rising world interest rates are going to push gold down. Please don't yell at me because that is just going to give me more time to buy bullion, which I am doing, as I have advised taking this opportunity to buy bullion on its way down. (notice I didn't say buy it at the bottom???) Gold- USD Quite interestingly, gold has dropped this week along with the USD weakness. That is a very gold bearish factor. Normally this is an inverse relationship, and the fact that both are dropping this week is a very unusual event. I believe this is very suggestive of strong gold bearish forces and possibly a big sea change on the world financial horizon. More will follow on this for subscribers. Gold-commodities Commodities are showing weakness, with the exception of oil. I believe that metals like copper are over bought, speculators have ridden the copper mania and other commodities manias of late, the whole sector has been in the news for several years now. Time for them to take money off the table.-As a matter of fact, friends, If I WOZ to characterize the entire world financial situation, its time for a lot of taking of money off the table in everything- which is why gold is going to drop with all these markets. (gold caveat- any major increase in Middle East violence or terror incidents anywhere) Obviously, weakening commodities are gold bearish short term. Gold-terror Interestingly, the terror and Middle East war situation has boomed gold up $50 last week, only to see that drop back the following week. This clearly indicates to me that even major terror events are having a hard time propelling gold up for any significant time. That is very gold bearish. This terror factor right now would normally keep gold up for weeks or even months. Particularly with the Middle East situation not even close to being resolved. Interpretation? There are definitely large gold bearish forces out there that are not being fazed for long by even war and terror. Caveat: any major new terror incident or war news will propel gold back up. But perhaps not for long. World financial liquidations - gold Rising interest rates are going to kill every major world stock market. I will reiterate that world stock markets and gold are synchronized. The last week they were not. That was due to terror in India and the war in Lebanon. Aside from these temporal flight to safety incidents, more of which are to come, overall gold and financial markets are liquidating and the world is going to cash. This is dollar bullish, and yen and euro bullish. People want dry powder now, that includes hedge funds, for their next speculations, which is probably going to be shorting markets quite soon. Now, more about gold and financial market synchronization. Right now, things like the Yen carry trade, and formerly a super cheap US interest rate, have caused trillions of dollar value of borrowed money to find its way into every major financial market, and to include real estate. Every major economy is now raising interest rates, and naturally, there is liquidation now due to tighter credit. That goes for stock markets, financial markets, and even precious metals. Hedge funds have been speculating in metals with leverage, and rising interest rates are going to contribute to precious metals weakening. As I have said the overall macro environment tells me that all markets are going to liquidate in the coming months. That includes gold -again, a caveat is war or terror news. More war or terror news will break the general liquidation synchronism, like happened last week with the Lebanon war and India bombings. Then, gold rose and stock markets dropped. But in the absence of new war or terror news, gold will regain a synchronism with financial markets liquidating for the short term. With all these factors listed above, I am quite sure, caveats aside, that gold is going below 600 not too far off. That means buying opportunity for us. This is should not be interpreted as bad news for gold. It is not, it is a short term world economic situation that is providing this opportunity to buy as gold drops. Quite possibly, this will happen within two weeks. The gold market is showing a lot of weakness and atypical behavior with its financial antagonists/protagonists right now, and typical behavior has been a gold bull. But this is a short term phenomena. Again, we are now clearly in a liquidation mode for financial markets of all types and cash is king - for now. My subscribers have been well informed of all these events and factors. They knew weeks in advance of gold's drop of $150 several months ago. They also have known for quite some time about my views that an increase in Japanese interest rates would cause some gold liquidation- as in this Monday. I made the latest two observations based on macro economic - gold research. The Prudent Squirrel newsletter is one of very few macro economic gold newsletters. I have a pretty good track record of overall big picture gold analysis. Stop by and have a look. Chris Laird The Prudent Squirrel Newsletter is a big picture gold and economic commentary. Stop by and have a look. 321gold Inc |
