Comments: Sorry for the long pause. I've had a lot on my mind lately so it was difficult to post for a while. Anyway, coming back to the matter at hand, the HUI looks like it is consolidating nicely since running up big until the beginning of November. The consolidation has sliced almost 12% off the HUI from its early November high of just over 460. It has also lasted for over a week now. I think, at this point, time is on the side of gold investors.
There is a danger however of a Head & Shoulders pattern as indicated in the above chart, which, if activated, would point to a drop to the 200 day SMA at around 360-370 HUI. I think such drop require gold to dropping down to 750 or so and the S&P500 taking another dive. Hmm, the more I think aobut it, the more I think that both are possible. Nevertheless, any such drops should not be feared, as I think Gold would have a great chance to bounce back.
Some things I've been paying attention to recently:
1. The COTs are still somewhat bearish, but they have shown some improvement during the last 2 weeks. Still, this situation may need 2 to 3 more weeks, at least, to get to a "bottom" range.
2. Gold:XAU ratio continues to be fairly positive, being closer to a buy than a sell, for gold stocks, staying above 4.50, and even getting as high as 4.90 recently.
3. I'm watchinhg closely what Treasury Secretary Henry Paulson will cook up to stave off the tide of foreclosures. Apparently, the plan will be to freeze teaser rates on certain troubled subprime mortgages. The big question is who will take the hit? The administration has sworn that taxpayer money will not be used in any "bailout". According to the linked article, it may be the investors in the mortgage backed securities who may take the loss, in the form of lower interest rates. I wonder who those investors are and whether they will sue. Anyway, the idea is that lower interest payments will stave off foreclosure which is in nobody's interest. But, such a bailout, if successful, may create some moral hazard. Government to the rescue whenever people screw up. My friend, Andy, put it best that capitalism and free markets take a hit if things are not allowed to fail.
Oh, if you have a chance, check out Jim Sinclair's Mineset. Jim, a die hard gold bug, has predicted 29 of the last 3 financial crises that the U.S. has had, and he has some interesting thoughts about the proposed bailout.
4. Oil has sold off recently, by nearly 10%. But with a cold winter on the horizon and a new set of Iran sanctions getting close to final approval, I wonder if we'll yet see $100 oil on this upleg after all.
5. Turmoil in Venezuela (don't take the "oil" out of "turmoil"...). Talk of nationalization of foreign companies and huge protests over a referendum about a constitutional amendment. I wonder how that will all end up.
6. U.S. market was up this past week after Citigroup got $7.5bil financing from the Abu Dhabi sovereign fund. I guess they needed it, but with an interest rate of 11%--just imagine, a huge commercial bank like Citi borrowing at 11%!--they must be getting desperate.
7. Finally... this is funny. The US Dollar may displace the Yen as the favorite currency for carry trades.
No comments:
Post a Comment