Comments: The high level consolidation in the HUI, which started at the beginning of 2007, appears to have ended in a complete bloodbath recently, with the HUI, breaking down totally from its slightly uptrending trading range--despite Gold not doing anything interesting. It seems that the panic contagion that has hit financial markets recently is also now spreading, irrationally, in my opinion, to the volatile miners as well. Gold to XAU ratio went through the roof, and is still at almost 5.00. The two support lines in the chart above, are critical. With the credit crisis looming large, it seems that market participants are selling volatility, and unfortunately, the miners have traditionally been one of the most volatile of investments.Actually, the current complete dumping of gold stocks (don't even get me started on silver), seems quite irrational considering the actions of the U.S. Fed recently. The Fed has added $100 billion in liquidity in recent weeks, through repo transactions, among others, as well lowering the interbank lending rate by 0.5%. In fact, it added $3.75 billion even today.
And the political pressure is mounting on the Fed. Treasury Secretary Paulson, mentioned today "We're really focused on the subprime market, and we're really focused on the homeowners -- mortgage holders -- who are in danger of losing their homes."
The ever glib Bush, insisted that "The fundamental question, 'Is there enough liquidity in our system?' And the answer is `Yes, there is,'" the president declared. Don't worry Mr. Bush, I have a hunch that when it comes to liquidity, there will soon be more than enough...
5 comments:
We are living in interesing times, indeed. Though having invested on and off gold and silver stocks for many years, I see very much the same kind of mindset prevailing.....It is one industry were the "H" word (for Hope) never goes out of style.
That said, I see two items of interest today:
1. The Swiss have been selling gold to put money into fixed investments....? Link here:
http://www.resourceinvestor.com/pebble.asp?relid=34974
They have more guts than I do.
2. Robert McHugh's Technical Index Indicator, the Hindenburg Omen guy, had a HUI new buy signal last night.
Somehow my gut tells me that we are in a lull before a storm. A bit of outright gold bullion may not be a bad idea....
Also take a look at the months ahead, posted on Seeking Alpha by Roger Nussbaum:
Q1 of 2008 will see a huge amount of adjustable mortgage resets.
http://usmarket.seekingalpha.com/article/45025
Regards,
Traveltrader777
Dear Traveltrader777,
Just a qucik note to say thank you for posting your comment. I've really appreciated your insights on the message boards, whcih come from considerable experienc ein the markets. I will take a look at your links and give some response about your thoughts this weekend. Have a nice weekend.
- Titan / Mike / Milosz
Trav,
Here are my thoughts:
1. If I recall correctly, the Swiss have been rebalancing their bullion portfolio to keep good at a steady % of their total assets, so it's nothing that unusual in my opinion. However, I think you've been more on top of the situation in Europe than I have.
2. Bullion has done just fine, which makes the recent collapse in gold stocks a bit of a mystery (though not really, when one looks at what else has been going in the financial markets).
3. Thanks for the Seeking Alpha article. That article gave me a good feeling as a gold investor. Looks like more USD liquidity may be in the pipeline for 2008 as well. Good stuff.
Thank you again for your comments. Hope to hear from you more often.
Cheers,
Milosz / Titan / Mike
ps. Did you paint those paintings on your website? I liked them.
In my comment 1 above I meant "to keep GOLD at a stead % of their total assets".
"Gold", not "Good". My bad.
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