C Hudson : Although I was a "foundation member" of the Kitco forum, it's now over two years since I've participated there.
To confirm a new bull market is suggesting many things which, in my opinion, are still uncertain.
I believe only time can say, retrospectively, if one is/was in a bull market or not. There is, in fact, also a semantic difficulty as to what a bull market actually means.
Nevertheless, there are certain factors which would seem to indicate that the 2 1/2 year bear market is over --- but this, however, does not automatically mean a new bull market has commenced. In particular, the cutting of the resistance line from 1996 is of fundamental significance. In my opinion, this has occurred.
For technical reasons in the market, at the moment, gold would appear to be in favor and a price rise is anticipated :
(1) Large short situation which has to covered. Unfortunately, if the hedge funds are broke they can't do it!
(2) Loss of confidence in other investment media
(3) Perception of value because of an apparently cheap price but whether this is valid, or not, still remains to be seen
(4) The idea of a "safe haven", whatever this may mean
(5) The liklihood that European CBs have stopped selling
However, three significant factors which I believe are necessary for a gold bull are not in place :
(1) Significant dollar weakness AND simultaneous REAL strength of yen and Euro. In fact, the Japanese economy is still in the deep doo doo and the Euro appears that it may not fly.
(2) Inflation, especially in the US but preferably globally. On the contrary, there is major deflation which is now aggravated by the hedge fund(s) insolvency
(3) Loss of confidence in the US economy. There is no significant evidence for this. In fact, the bull market in US bonds continues unabated with resulting lower and lower interest rates.
Nevertheless, the amazing way in which gold shares took off during the past few days would certainly seem to indicate that something big is afoot. Maybe a currency realignment or something similar. |
