Great questions, but hard ones.
1. What was the main catalyst, or cause of this explosive
move in gold and gold stocks?
Of all the things that are traded, nothing is more influenced by speculation than gold. It's actual uses are far outweighed by its usefulness as a perceived hedge against inflation, currency devaluation, war. So why the shift towards gold by investors?
If you crunch numbers, the one variable consistently related to gold over time is oil. It had a 0.9 ce from 1950 to the 1990's, falling to 0.7 in the subsequent decades. Oil is rightly perceived as an inflationary pressure, and so its effect on gold is clear. Both gold and oil also react to currency changes, although that correlation is much hard to put together.
There is also a worry regarding stagflation, as commodities have stubbornly held or risen despite obvious slowing in the US. This is a great scenario for gold. Furthermore, FED easing to create a soft landing is perceived, maybe accurately, as also fueling the inflationary fire.
So the two things: inflationary pressures from commodities + a fear of monetary looseness during a recessionary, dollar weakening macro economic picure are plenty to juice the precious metals.
2. What "forward looking" message can you take away
from this move in gold?
Recent move in gold stocks coincides with the market converting more players to the recession side coupled with the prospects of FED easing and Oils attack on $100. The gold/oil correlation has become very strong again recently suggesting that gold is being supported by oil.
3. Did you see anything unusual, contradictory, or confusing
in this move? ... if so -- what?
Gold moved up even as the dollar went sideways. But the correlation between gold and the dollar hasn't been that that great for several years now. The other confusing thing is that the stocks had been selling off for a while which usually preceedes a falloff in gold, but in this case gold led the shares. There might be an end of year force in here that I don't fully understand. The one exception to the above is ABX, which has broken through its high and on higher volume, which you can not say of any other miner. Aberration or Leader?
4. What trading/investing opportunities either near term,
or longterm, do you see developing out of recent events?
Take some profits in gold if you have them, as this retest of Nov highs looks like it failed. Future inflationary pressures are easing per ERCI data. Oil remains a wild card but in a trend that has humbled shorts, myself included. If gold is still something you want to have, then a hybrid hedge, such as long gold, puts on oil services is what I would do.
Personally, I just finished divesting myself of the yellow metal, in all forms and am putting the proceeds into what I think is an undervalued market, especially in tech. |
