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Strategies & Market Trends : Value Investing
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To: Mr.Gogo who wrote (52135)8/16/2013 9:41:41 AM
From: FIFO_kid21 Recommendation

Recommended By
chris714

   of 78751
 
Re:Precious metals I totally agree with you the longer term gold should trend lower provided we get a true tapering from the fed (which obviously is now very questionable looking at the recent slope of MZM since early July)coupled with interest rates rising which would detract from the metal since it does not generate an recurring income stream and barring any negative macro event from a major currency.

My explanation for this recent rise in gold is 4 fold. 1)The metal was clearly oversold on a technical basis and flushed out all of the hot money. 2)Seasonally we are getting into a stronger period of demand. (August- the Chinese new year) 3) We recently had a catalyst of major political unrest in Egypt. The other is much more obscure and can be provided by a weekly and longer term charts provided by the St Louis fed. What taper? MZM has been rising at a slope similar rate to where at worst the metal was stuck in a neutral pattern since July. Granted the fed has been tapering YTD and the slope actually was slightly negative during the first 3 months of the year where I was calling some major corrective event in the market which did eventually negatively impact much of the commodities market beginning in April.

Calling an upside is difficult but I think the price of the metal can rise up to $1525/oz provided the slope of the MZM continues at this rate. I believe this will be a major resistance level.

I think the MZM chart is about the only leading indicator there is to predict the market's direction with typically a 1-4 month lead time under normal conditions. Exception: It took about 6 months to take effect during the credit crisis in 2008. But it predicted the flash crash in 2010 and the tech bubble crash in 2000 when the reversal of liquidity provided by the Y2K scare never materialized.



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