Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Chinese Tech Stocks CCP Paranoia and Best AI Tech Stocks ETF - 26th Oct 21
Food Prices & Farm Inputs Getting Hard to Stomach - 26th Oct 21
Has Zillow’s Collapse Signaled A Warning For The Capital Markets? - 26th Oct 21
Dave Antrobus Welcomes Caribou to Award-Winning Group Inc & Co - 26th Oct 21
Stock Market New Intermediate uptrend - 26th Oct 21
Investing in Crypto Currencies With Both Eyes WIDE OPEN! - 25th Oct 21
Is Bitcoin a Better Inflation Hedge Than Gold? - 25th Oct 21
S&P 500 Stirs the Gold Pot - 25th Oct 21
Stock Market Against Bond Market Odds - 25th Oct 21
Inflation Consequences for the Stock Market, FED Balance Sheet - 24th Oct 21
To Be or Not to Be: How the Evergrande Crisis Can Affect Gold Price - 24th Oct 21
During a Market Mania, "no prudent professional is perceived to add value" - 24th Oct 21
Stock Market S&P500 Rallies Above $4400 – May Attempt To Advance To $4750~$4800 - 24th Oct 21
Inflation and the Crazy Crypto Markets - 23rd Oct 21
Easy PC Upgrades with Motherboard Combos - Overclockers UK Unboxing - MB, Memory and Ryzen 5600x CPU - 23rd Oct 21
Gold Mining Stocks Q3 2021 - 23rd Oct 21
Gold calmly continues cobbling its Handle, Miners lay in wait - 23rd Oct 21
US Economy Has Been in an Economic Depression Since 2008 - 22nd Oct 21
Extreme Ratios Point to Gold and Silver Price Readjustments - 22nd Oct 21
Bitcoin $100K or Ethereum $10K—which happens first? - 22nd Oct 21
This Isn’t Sci-Fi: How AI Is About To Disrupt This $11 Trillion Industry - 22nd Oct 21
Ravencoin RVN About to EXPLODE to NEW HIGHS! Last Chance to Buy Before it goes to the MOON! - 21st Oct 21
Stock Market Animal Spirits Returning - 21st Oct 21
Inflation Advances, and So Does Gold — Except That It Doesn’t - 21st Oct 21
Why A.I. Is About To Trigger The Next Great Medical Breakthrough - 21st Oct 21
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold Bull Market is Back in Play

Commodities / Gold and Silver 2010 Apr 09, 2010 - 06:10 AM GMT

By: Seven_Days_Ahead


Best Financial Markets Analysis ArticleThe Macro Trader’s view:

Our views on Gold have been well aired over the months, if not years. We are long-term bulls. But the market has suffered several steep and often protracted corrections that have on occasion endured for months.

We judge the market is currently in such a phase, but shows signs that it is now coming to an end. Naturally we expect price action to resolve into a fresh leg of the long Bull Run. But what have been the dynamics behind the market over recent months and why now is it beginning to retest the upside?

The relationship between the Dollar and Gold has been well-established throughout the current financial crisis/recession. A weak Dollar translated into strong Gold. The Dollar was weak due to a steep economic downturn which led the US monetary authorities and Administration to pump in unprecedented amounts of stimulus, which led China and others to criticize, as they feared a debasement of their own massive foreign currency reserves, primarily Dollar-denominated. So far, so good.

But the Dollar began a strong recovery late last year as several key data releases, principally December 2009 Non-Farm Payroll, came in much stronger than expected. This coincided with the Dubai debt crisis, which led to a sharp rise in risk aversion, benefitting the Dollar as traders heavily bought into safe haven trades.

The Dubai crisis morphed into the Greek debt crisis, more safe-haven buying, all of which worked against Gold.

Now the Dubai crisis is off the radar and the Greek drama, while still rumbling on, now has a safety net, albeit of untested efficacy. As a result traders have largely turned their attention to economic fundamentals, which have improved throughout this year.

Indeed the US economy looks to be slipping into a familiar recovery pattern as both ISM surveys continue to strengthen and non-farm payroll last week reported a healthy 162,000 new jobs.

Why then should this benefit Gold? Surely, stronger US data will benefit the Dollar? Yes to a degree, and the last few days have seen the Dollar bounce on lingering Greek debt fears. |But Gold too has been a major beneficiary. As the US recovery deepens and risk aversion subsides, the Dollar loses its safe haven protection and becomes victim to the Feds low interest rate policy which Bernanke has reiterated will remain in place for an extended period, (several months). But, more important for the Dollar, is the US fiscal stance. The budget deficit under Obama has exploded and so too the debt to GDP ratio and recent health reforms compound the problem.

The Obama administration offers no credible plan to shrink the deficit, so while strong growth supports the Dollar, heightened concern about US public finances undermine it thus the Gold play can reassert itself.

If the US recovery runs true to past form, the current fiscal stance together with current monetary policy could easily resolve in higher inflation. Other countries run similar policy mixes, so the only asset class truly independent from national economic policies is Gold. It is the original form of money and store of wealth.

The Fed’s stance is understandable: they don’t want to act too soon, but will when they are convinced of a self-sustaining recovery. The Obama administration’s stance isn’t understandable. Short-term fiscal stimulus was not only good but very necessary, but as the economy recovers, the Government needs to wind down its spending and repair its finances. Their inability to address traders’ fears on this matter is why we see Gold as a long-term bull market.


The Technical Trader’s view:




The power and potential of the continuation chart from mid 2008 resides in the completed Head and Shoulders continuation pattern set to drive the market up to1350 as a minimum.


Note too, the completed bull falling wedge…


But the force of the weekly chart becomes all the more clear when taken in conjunction with this additional Head and Shoulders pattern in the day chart.

The pattern completed yesterday.

A confirmed close above the neckline at 1134 today would sustain the bulls’ hopes.

The minimum measured move implied by the pattern? As far as 1245.

The bulls are in charge short, medium and long term.

Mark Sturdy
John Lewis

Seven Days Ahead
Be sure to sign up for and receive these articles automatically at Market Updates

Mark Sturdy, John Lewis & Philip Allwright, write exclusively for Seven Days Ahead a regulated financial advisor selling professional-level technical and macro analysis and high-performing trade recommendations with detailed risk control for banks, hedge funds, and expert private investors around the world. Check out our subscriptions.

© 2010 Copyright Seven Days Ahead - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Seven Days Ahead Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in