...a little bigger picture:
Lot's of noise out there on this short-term volatility...time to widen the screen a bit perhaps.
Question #1 should always be - are the broadbased underlying fundamentals still intact ?
...pick one:
THE DOLLAR
- Mega-Bear: Are the Terrible-Twin Deficits & Greenspans out of control printing presses enough to cause a USD freefall collapse & the End of all Fiat/Global Meltdown ?
- Little-Bear: Is it as simple as too many Greenspam-greenbacks bloating Central Banks and in Circulation in the world today from the US reflation & is this merely an over-due natural correction - with alarming, but yet manageable deficits ?
- Fox: Is US Policy managing the necessary controlled descent of the USD to close the trade deficits & prop up economic/job recovery in the US Manufacturing & Export sectors ?
fwiw, personally; I recognize the falling Dollar as an obvious positive catalyst for POG, but I'm not in the camp that the USD is near total collapse, or freefall quite yet (not that it couldn't get there someday, or that there can't be Rogue Wave events adding major downside volatility)...King Dollar had to be deflated and it's not all bad.... just ask the Germans about the benefit of King Euro here... as reported in todays FT - Unemployment in the Germany stands at 11% and in the States of Saxony-Anhalt it's 28%, Mecklenburg-Vorpommern is at 21.5%, Saxony at 18% etc. ...Germany & Japan have higher Debt:GDP ratio's and isn't China's Banking system a model for transparancy (could they even manage a free floating currency)...and now there's the Putin factor in all those attractive Russian Commodity plays...is the USD going to find support at 80 - as the still the "best of the worst" - Fiat choices ?
But, just as Tree's don't grow straight to the Sky - what "must" come down; doesn't go in a straightline to hell either...doesn't take too much savy to anticipate that there will be many interventions to control the USD's descent, or that occassionally when everyone in the World seems to be loaded up on one side of the trade - that some will begin to take the other side of the trade; or that profits won't be taken....moral to that story is that one still needs to be anticipating (selling into strength) and not reacting to (selling into weakness)cyclicals all thru their cycles...ain't no buy & hold sector here; never was, never will be...and it's never a bad idea to sometimes just step aside (read Cash) as the Big Players in a sector start throwing their weight around & patiently waiting for a re-entry trading opp in either direction.
If you're still in the Mega-DollarBear Gloom & Doom - End of the Fiat World Camp... no further comment is necessary as this case has been and will continue to be made daily in GoldBug Forums all across the iNet....regardless; not much arguement to the USD's potential continuing decline...but, even if the bulk of the USD decline has taken place "for now"...there's still our old friend Mr. Inflation rearing his ugly head.
INFLATION
- fwiw this is my personal fav' for the individual Fundamental Driver of the year for 2005/2006....will the Gold Story soon shift from the USD to Inflation ?
- Does anyone from Bill Gross to Joe Six-Pack believe the US Government Inflation stats ?
- when, not if.
DECLINING PRODUCTION CURVES FOR THE GOLD MINERS
- given the collapse of Capex in the late 1990's certainly no light at the end of this tunnel as broadly reported statistic's support....same arguement as in Oil... few, if any remaining Elephant Discoveries still out there.
GROWING PHYSICAL DEMAND - NEW MARKETS
- new Gold ETF
- growing Indian Economy/Jewelry Demand
- new Markets in China
- Dinar
...still a rather strong one-sided arguement.
Question #2 is - are the Technicals still positive ?
- in taking a longer and broader technical view of the cycle here - it doesn't look like the game's over for the HUI unless it breaks that general longerterm trendline @ 179.86, GOLD @ $377.12 or untill the Dollar rallies thru 93.78.
HUI
stockcharts.com[w,a]daclyyay[df][pb100!b600][vc60][iLb14!Lk14]&pref=G
GOLD
stockcharts.com[w,a]daclyyay[df][pb100!b600][vc60][iLb14!Lk14]&pref=G
US DOLLAR
stockcharts.com[w,a]daclyyay[df][pb100!b600][vc60][iLb14!Lk14]&pref=G
As widely reported & discussed; the last 4 US Dollar cycles were of 6, 6, 9 and 5 years in duration. If this cycle matches the shortest cycle in duration over the last 30 years - we're still only at halftime...lot's of time to hold, or fold; walk, or run away; or even re-enter again (vbg).
As Commodity Cycles play out & mature; different investor groups and classes are constantly exiting and entering a given sector. In today's Market; Speculative Traders, or Hot Money Hedge Funds can be in the HUI/Goldstocks stocks today and out tomorrow - flipping funds to Biotech's, Chipstocks, Health Care or the flav' du Jour.
I always look for the changing risk:reward ratio's in the market...or even out of the market - where I've been of late; as I saw more "leverage" in the physical business world than in the paper one over the last 18 mos.... but, I am ALWAYS patiently waiting for swings to extreme's in either direction...and waiting for investor groups entry/exit moves offering interim trading opps in either direction.
Appears to be an interesting transition here in PM's & Commodities as a lot of Hot Money is leaving the sector and profit's are taken.
If the Dollar can stage an interim bounce here - might be a little sub-play in the So African Golds.... Rand Strength/Policy will be addressed sooner, or later...So African isn't going to stand by and watch a National Interest move to maintenance and bleed red forever...DROOY always interesting for me - from recent press:
- More than a third of the company’s gold is produced outside South Africa.
- getting $440 an ounce last Qtr and producing $220-230 = + $200 an ounce margins.
- Offshore assets include a 45.3 percent stake in Australian Stock Exchange-listed Fijian miner Emperor, 20 percent of the Porgera joint venture in Papua New Guinea with Placer Dome, and the wholly owned Tolukuma mine in Papua New Guinea.
- Offshore assets produced 77,387 attributable ounces of gold for DRDGOLD in the September quarter.
...some have talked about the Explorers as the place to be; others like the under-valued emerging producers...and the So African's are certainly the most of out favor.
Now...if you smell opportunity here; the short-term technicals become important in picking a trade, or a sub-sector...and timeliness is next to Godliness...hard to argue against begining to nibble & average into this down-leg here imo.
Personally I wouldn't mind seeing a little more yellow-blood in the streets (vbg).
ciao` |
