First I am happy to invest into gold stuff at what could be an interim bottom, considering how high the stuff traded, and how dearly I could have overpaid just a few months ago.
I think that it could take some time until the big gold and other basic materials stock turn around. Money was, or probably is flowing out of hedge funds or other funds due to performance issues. This has to stop at one point.
Second it would need commodities, metals in general and gold in particular not to further devalue (some ags show promising signs these days). The low interest, potentially inflationary environment is not too bad in that regard. But clearly, charts are broken, and as I said a few months ago, "people need to eat" so it is not attractive to the mo crowd. So the only driver is fundamental, demand.
i expect that it could take 6 months until we see a significant gain in the GDX. The gap and crap activities like today, open it up 5% on the gold turnaround then it sells down are not really encouraging. I bought stock and I constructed some cheap calendar and bull spreads in GDX which reach their target payout at 25 or so and not in 2008 but in 2009.
Regarding the dollar, Eur, etc. there are a lot of factors which contribute to the Eur fall and DX run, most prominently:
-hedge fund redemptions of $ assets; meaning they must buy back their financed dollars.
-market value adjustments of hedged $ assets: Consider an asset bought at 100, financed with 100 dollars. It run to 150 and people sold more dollars. Now its worth 70 and the folks need to buy back 80 dollars to hedge the $ exposure to 0, etc.
-funds still fleeing the carry trade, and European borrowers (mostly housing) desperately trying to buy back the foreign currencies Yen, Swiss and USD.
-The Europeans decided to print 2T to support their banks.
-The british pound, well it decoupled to some extent, but it sees no love at 1.60, so far.
All this is a toxic mix which could drive the Eur even lower. So whatever the US fundamentals are, the Eur is facing serious headwinds. Its chart is not unlike Corn, or of course Oil so one could pick any chart to measure if a turnaround occurs, or not.
Todays evenings action: to trade the EUR at 1.30 and the pound at 1.6320 then let them crap 100 and 200 digits are symptomatic for those markets... what should I say? When I looked at the screen I first thought this is an error, then I just sold. |
