Brief Gold (and Market) Comment:
Gold tumbled over $40 yesterday, which was no surprise, of course, and represents a mini preview of what will take place later this year as the Depression deepens. Although I have turned bearish on the precious metals, I haven't quite reached the point where the picture looks totally bearish from a trendline perspective, but that time is coming. Remember, Gold did well during the Great Depression only because the government decreed that it would track the dollar. And, of course, everything fell in value relative to the dollar. This time around, Gold has no such "anchor" to keep it up. So, reasoning that Gold is a hedge against a true deflation is very misguided and, at the least, very premature.
The Euro will be a good short sale at some point soon. Gold will probably reflect that opportunity by rallying temporarily. Inflation is falling into negative territory soon and that will be a drag on the price of Gold (and a boost to the price of bonds).
The most recent market decline has been impulsive. But I'm still expecting a rally into late August before the real fireworks on the downside ensues. July 9-12 represents the window for an intermediate term bottom.
I have a ladder of good till cancelled orders on the long side in for TAN, EWP, EWI, PWND, SLX starting at considerably lower levels. I expect some panic to set in as the S&P plunges below 1000.
In a secular bear (era of stagnation), the funds and stocks that have fallen the most will rebound the most as the market rallies into late August.
Off to Nationals Park for July 4th weekend. |
