Too many similarities to the 70's to ignore them. "in the two years from the first quarter of 1973, annualised, quarterly real GDP in the US plunged from 10.6% to -4.7%, yet the price of gold tripled, that of oil quadrupled, and wheatâs gain to the monthly peak was 160%. Nor was this an isolated incident, for worse was to come, just five years later, during the two years from the second quarter of 1978, when US GDP underwent an even more remarkable swoop from +16.7% to -7.8%. That time, wheat rose 70%; the price of a barrel of crude was well on its way to tripling; and the number of rapidly shrinking dollars needed to buy an ounce of gold quintupled." It isn't that much different today, except its worse. The oil producing nations despise us. Some of them are no longer accepting dollars for oil. We are drowning them with paper and electronic dollars from our printing presses, and at the same time drowning ourselves in debt, and totally dependent on them accepting more paper for oil to keep the balls in the air. We are "monetizing" the oil price increases, and eventually its going to cause the dollar to collapse like it did in the 70's unless and until we get our imbalances back to reasonable levels. We can't keep borrowing $500 billon dollars more each year, and we can't keep importing $600 billion a year more than we export. Actually, IMO, its a miracle it hasn't caused a total collapse of the dollar already. It shouldn't be a surprise to anyone if it has the same effect on gold price this time or more than it did the last two times. THOSE WHO ARE IGNORANT OF PAST MISTAKES ARE CONDEMMED TO REPEAT THEM The quote with the statistics came from this article.... http://www.prudentbear.com/index.php/GuestCommentaryHome
When people panic out of the stock market they are buying dollars/treasuries because that's what the money market funds the brokers put them into buy with the money. IMO, if its the same as the last couple times, when the panic ends, thats the top for the dollar bounce and bottom for gold dip.
780 target or lower still stands as a distinct possibility. The dash to cash is back in full force as global equities markets continue to get sold down. Short rates are breaking down below their respective August lows and things could begin to get real ugly across the board again here. Be careful out there... "The so-called TED spread, the difference between three- month Treasury bill yields and the London interbank offered rate for the same maturity, fell to 2.10 percentage points, from 2.2 points yesterday, after earlier reaching the highest since August, a sign banks are charging more for loans. Three-month bill yields touched 2.75 percent today, the lowest since Aug. 20." http://www.bloomberg.com/apps/news?pid=20601087&sid=aimb0vpmKjI0&refer=home
Here is how I am seeing the weekly, daily and 60 minute charts. The price has fallen from a rising wedge on the 60 min. I agree it could test the 780 area again. But the 50 day has been strong support so far. JMO
Inflation up, means gold should go up. But the dollar will be strong here too. I just dont have faith in the bull case at these levels.
Yeah, dollar up because people changing view to Fed doesn't cut more. But if Fed doesn't cut more we get a DEPRESSION instead of recession in 2008. Watch the pink slips fly by January. 2008 is going to be a very ugly year for America.
So far the week looks set to close in quite a bearish tone for the base and precious metals complex. I did provide forewarning of this distinct possibility on the evening that gold touched 815 so I hope some of you caught this. The issue at hand is the expected turn date in early December appears to be down instead of up as many had assumed that the FOMC would be more accommodative to the markets. As a result of this hawkish overtone, the Dollar is catching a bid and the unwinding of speculative positions in many global markets begin to unwind as a result. The consensus from many of the worlds best known economists are foreseeing a very sharp downturn in global economic growth in the 1st half of 2008 as a result of the lockup in all credit markets. If things do begin to slowdown dramatically then the dash to cash will continue and further losses in the equities and metals markets will likely take hold. I would be watching the S&P500 at the 1470 level for instance as any close under this price will lead many to the belief that a new intermediate bear market is underway...