Many are turning bullish gold and the miners once again. Same thing they did in July of 2014 and November of 2014 through the beginning of 2015. A commenter on one of my articles sent me this graph of the two options we are at with gold at present. I lean, as you might guess, towards option (1), lower. But I have been leaning long on the micro level for some short term trades that have turned out well.
In my explanation of what’s going on with the economy, it’s not just U.S. data that is important but that of China, Russia, Europe, Japan and other countries. Lately these markets have rebounded and the U.S. stock market has rebounded recently too. The dollar has maintained above the 86 mark and that is the level we are dealing with for gold. The dollar is NOT breaking down.
We are simply getting a bounce I believe and this will be followed by further declines for the metals. This is especially true if the stock market can get a little more of a run and money leaves the gold trade and heads back into stocks. We are already seeing some of this with money leaving the 10 year treasury as rates creep back up after falling below 2%.
One of the indicators I have followed and mentioned in my 8 Indicators Where Gold May Go Next article, gives me an idea of where gold may go next is the VIX (VXX). I don’t mention it as much but probably should have during this last run up in the price of gold. That indicator had a move higher with the China market decline and has since Sept. 29th started its move back down. I view this as a leading indicator and think it could drag gold lower if it continues south.
The important part of what I write yesterday in answering the question about the current bounce in metals and deciphering what may occur next is what the data tells me. These short term moves do not change the trend but are blips in an overall downward trend for rates, the VIX and gold, and upward trend in the dollar. What economic data that comes out that will change that scenario is key and without real production? I can’t see anything but contraction everywhere.
But that doesn’t mean I can be a little bullish things now and then and those who have subscribed to my ETF Research Analysis know and experience the benefits from this daily. As I mentioned in yesterday’s article this analysis will continue soon at SeekingAlpha.com and I will announce it here.
For those who have the Mining Package, sit tight. I’ll be updating things with the next 10Q’s that come out and give you my thoughts. You know as being part of the ETF Research Service where I stand overall and hopefully you, like some who have written me, are benefiting overall. If not, email me and I’ll give you the personal touch you may want in answering your questions. firstname.lastname@example.org
Remember, this is the tortoise and the hare and just because we get a move up doesn’t mean the bottom has not been reached.
Doug Eberhardt is a 28 year financial services veteran and precious metals broker selling gold and silver at 1% over wholesale cost. Doug has written a book to help investors understand how gold and silver fit into a diversified portfolio, how to buy gold and silver, and what metals to buy. The book; “Buy Gold and Silver Safely” is available by clicking here Contact phone number for Buy Gold and Silver Safely is 888-604-6534
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