@pound sterling -- trotsky, 11:52:57 01/24/07 Wed
i note that cable nearly tagged the $2 level yesterday - trading only 90 bips below it. nobody really thinks it can surpass $2 - it's too formidable a psychological barrier. so if it DOES trade through that level, i'd expect a big move to ensue. everybody knows the pound is overvalued, yada yada - there are a thousand reasons why it's 'impossible'. we'll see.
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# @gold and crude -- trotsky, 10:56:00 01/24/07 Wed
for reasons that are not entirely fathomable to me, gold stocks (and gold) continue to trade in tandem with - crude oil. there is little rhyme or reason to this, especially w.r.t. the gold producers, since their margins tend to benefit from lower oil prices. so while commodity trading funds may have a tendency to trade certain commodities in the same way, i.e. lumping them together directionally, there seems to be no good reason why the shares of gold producers should blindly follow, especially in view of the fact that apart from the shorter term directional linkage, gold has been strongly outperforming oil for quite a while now:
gold to oil ratio - up 50% from its 2006 lows!
note in this context that historically, the strongest profit margin expansions for gold producer have taken place when business cycle contractions have raised the ratio of gold vs. other commodities, iow. when major input costs for the gold mining industry have trended down relative to gold.
the conclusion is that there remains a fairly large contingent of market participants who are buying and selling gold stocks for the wrong reasons - which in turn proves that the long term bull market in gold remains intact, as it can not possibly conclude until most market participants have actually realized what really drives the sector. |
