|
What a difference a month
makes. I have been "furiously" trying to find out what has changed
in recent weeks.
Are the central banks selling their Gold?
Do we have reasons to believe that the talk about
inflation has been blown out of proportion?
Was there a story about a large Gold find that I
just happened to miss?
Did the price of gold head higher because hedge
funds started buying gold in 2001?
Of course, it is foolish to think that any of the
fundamentals that have been driving this bull market have changed. If
anything, the fundamental reasons have only intensified. Inflation concerns,
for example, have grown across the board. The AARP reported that the average
wholesale price of prescription drugs rose by 3.9% last quarter, which was
four times the rate of inflation. In Germany, producer prices shot up
by the highest amount in 24 years. Back in the states, the rental index of
the core CPI was up 0.6% in May, the biggest increase in 16 years. Globally,
Central Banks are scrambling to raise rates and put a stop to inflation.
Ironically, most Wall Street economists seemed
shocked by the recent news of higher than expected core CPI numbers. Ben Bernanke has even stated that the recent rise in the core
consumer price index is an "unwelcome" development. Personally, I
don't think it was difficult to predict that inflation was going to be a
concern. Whether it was the flooding of liquidity or the consistently high
energy and raw material costs, it was only a matter of time until the core CPI
reflected this. In any event, I expect the core CPI to spike higher and force
a data dependent fed to continue raising rates.
If anything, the recent sell off in the gold market
has reaffirmed to me that people are still not buying into Gold as a legitimate
asset class. In the last several weeks, I have had conversations with
self-proclaimed Gold Bulls that decided to sell their gold coins during this
recent sell off. Although it was quite obvious that there were a good amount
of speculators and technical buyers that had entered the market within recent
months, I was surprised at how many people panicked during this recent
sell-off. In truth, shaking lose the speculators was healthy for the overall
direction of the Gold market.
So where do we go from here?
The long term outlook remains the same. Gold prices will continue marching
towards $1000 plus. I also believe that we will see new recent highs before
the year is over.
In the short term, John Carter of
tradethemarkets.com was kind enough to put together a short 8 minute video
presentation on the technical outlook for Gold.
If you are interested in learning more about the
commodity bull market, I urge to pre-order my forthcoming book, "Commodities for Every
Portfolio: How To Profit from the Long-Term Commodity Boom".
Emanuel Balarie
Senior Market Strategist
Wisdom Financial, Inc.
Direct toll free: 866-465-0017
International: 949-548-2021
Emanuel Balarie is the Senior Market Strategist at Wisdom Financial.
As an expert on foreign markets, foreign currencies, and the precious metals
industry, Mr. Balarie often speaks at public
engagements and his research is regularly published in investment
newsletters. You can find out more about Mr. Balarie
and his services at www.wisdomfinancilinc.com
The risk
of loss in trading commodity futures contracts can be substantial. You should
therefore carefully consider whether such trading is suitable for you in light
of your financial condition.
| 
