GOLD
The economic calendar on Wed. is loaded with some of our favorites including Jobless Claims, Durables and UK GDP. So we'll post updated charts after they are released tom. For now we have to dive into the Gold argument. After all it has become the "elevator conversation" piece, meaning that the bubble is ever-present and the question is where will it end?
Doing some research today on Gold was interesting, especially as an FX person who's never traded this metal before. First off, unlike tulips, this isn't the first bubble in Gold. It was only 30 years ago that the prior Gold bubble popped. See the chart below, we've been here before:
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The charts below cover 1970 – 1990. The one thing that I notice is that while Gold was rocket-launching during the '70s stocks were Not. When Gold corrected in the '80s the rocket-launcher moved over to stocks. What happened? Respectability in the central banks?
Paul A. Volcker (August 6, 1979 – August 11, 1987). Under Greenspan/Bernanke we’re supposedly seeing lower inflation (change the focus to the core rate, not actual levels) and lower interest rates. Maybe we’d be better off if Volcker II was at the helm, stocks might prosper again as history suggests.
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The same charts are below to better showcase the dates.
To conclude we should be paying attention to the Gold debate if you have any interest in stocks. For now my upside target in Gold is $1210 which is a 61.8% projection of the move from $253 to $1000 and the correction to $740. Of course we may not stop there which would open up $1500 which undoubtedly would be a bad signal for stocks.
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