latest public sentiment data from 1/4/11 shows that enthusiasm was muted for
that stodgy old monetary metal, gold, as compared to copper, silver and other
commodities. This makes sense as we are on the go-go growth trade right now.
Gold is more a counter-cyclical asset. Of more concern to the various
substance addicts playing in the broad casino should be the gold-silver ratio
and its implications if it should confirm the global anti-party, the USD.
But for now, we just look at nominal gold because surely there is mounting
concern out there. A couple points: a.) As human beings -- part of a society
that we would like to see succeed -- we should not want to see gold and the
"Go Gold!" crowd succeed; but b.) they probably will succeed, after
their herds are summarily tested and the weaker ones punished. That is
because we have monetary alchemists running the financial system, and my
belief is that ultimately you cannot succeed by implementing amplified
versions of the same policy that killed us last time.
This is the gold market, my friends. You have resolve, you manage risk, or
you are collateral damage.
As to the chart below, it shows that the weekly view reveals such terror that
I just don't know if I can bear to look at it. Well, okay, I will force
myself to see the supports at 1340's +/-, 1260's +/-, 1200 +/- and yes, 1000.
One freaking thousand dollars an ounce, for insurance. Really, if you are committed
to honesty in your financial views, you realize that gold is simply about
value and even in the (in my opinion, at least) unlikely event we are going
to 1000, it would be healthy to realize that the lump of heavy and hyped
metal has retained value wonderfully for 10 years now. This would be the case
even at $1000 per ounce.
Here is something you should know about me: I am in a near constant state of
unease when it is all too easy, when Austrian Schoolers and Gold Bugs are
confidently spouting inflation dogma and when this stuff shows up in the
mainstream. I am comforted in times of doubt, because those are the only
times I am able to distinguish myself ... as nobody wants to listen to
cautious people when the party is on. There is too much coin to be made
running the trend. I sometimes wonder if I am not bludgeoning our subscribers
with all the risk and caution talk. But I realize that after a settling-in
period, most seem to appreciate seeing the whole spectrum of possibilities,
from which they make their decisions.
I have tried to convey that, yes, we are on an inflationary continuum by
showing what I think the treasury bond market ultimately is -- a lever used
to pull the crank on inflationary policy (to varying degrees) over decades --
and more recently, the big picture of the "bank loans" continuum,
which is a good way to view the "success" of such policy, as the
velocity of money has remained in a big picture uptrend, despite some
cataclysmic dives along the way. If long term interest rates break the
monthly EMA 100 and trend upward, things are going to go asymmetrical.
If they reverse lower into a deflation issue (not real deflation, mind you;
it has never been, for as long as the continuum has been running),
opportunity will arise. With this week's position in (IEI), by the way, I
take my first step in this direction. The shorts on the broad markets are at
this point not so large, and indeed the charts of the three January longs I
am playing suggest further upside, at least for some stocks.
to paraphrase Sgt. Barnes in Platoon: "If the machine breaks
down, we break down ... and I'm not gonna allow that to happen."
Indeed, these "plays" last as long as the market remains intact, or
hopefully to their chart objectives.
But this started out as a gold post. If gold finds itself at a thousand
bucks, the herd will once again not capitalize because its perceptions
will be all ... SNAFU, if you will.
Stay cool out there. Things may get interesting before January is done.
Disclosure: I am long IEI.
Additional disclosure: Long a high quality core of gold stocks, long a
few "plays," initial shorts on broad market, long USD.
© 2005-2009 Gary Tanashian