Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Stop Believing The 'Economy' Is The Same As The Stock Market - 12th Jul 20
Spotify Recealed as The “Next Netflix” - 12th Jul 20
Getting Ahead of the Game: What Determines the Prices of Oil? - 12th Jul 20
The Big Short 2020 – World Pushes Credit/Investments Into Risk Again - 11th Jul 20
The Bearish Combination of Soaring Silver and Lagging GDX Miners - 11th Jul 20
Stock Market: "Relevant Waves Vs. Irrelevant News" - 10th Jul 20
Prepare for the global impact of US COVID-19 resurgence - 10th Jul 20
Golds quick price move increases the odds of a correction - 10th Jul 20
Declaring Your Independence from Currency Debasement - 10th Jul 20
Tech Stocks Trending Towards the Quantum AI EXPLOSION! - 9th Jul 20
Gold and Silver Seasonal Trend Analysis - 9th Jul 20
Facebook and IBM Tech Stocks for Machine Learning Mega-Trend Investing 2020 - 9th Jul 20
LandRover Discovery Sport Service Blues, How Long Before Oil Change is Actually Due? - 9th Jul 20
Following the Gold Stock Leaders as the Fed Prints - 9th Jul 20
Gold RESET Breakout on 10 Reasons - 9th Jul 20
Fintech facilitating huge growth in online gambling - 9th Jul 20
Online Creative Software Development Service Conceptual Approach - 9th Jul 20
Coronavirus Pandemic UK and US Second Waves, and the Influenza Doomsday Scenario - 8th Jul 20
States “On the Cusp of Losing Control” and the Impact on the Economy - 8th Jul 20
Gold During Covid-19 Pandemic and Beyond - 8th Jul 20
UK Holidays 2020 - Driving on Cornwall's Narrow Roads to Bude Caravan Holiday Resort - 8th Jul 20
Five Reasons Covid Will Change SEO - 8th Jul 20
What Makes Internet Packages Different? - 8th Jul 20
Saudi Arabia Eyes Total Dominance In Oil And Gas Markets - 7th Jul 20
These Are the Times That Call for Gold - 7th Jul 20
A Reason to be "Extra-Attentive" to Stock Market Sentiment Measures - 7th Jul 20
The Beatings Will Continue Until the Economy Improves - 6th Jul 20
The Corona Economic Depression Is Here - 6th Jul 20
Stock Market Short-term Peaking - 6th Jul 20
Gold’s Major Reversal to Create the “Handle” - 5th July 20
Gold Market Manipulation And The Federal Reserve - 5th July 20
Overclockers UK Custom Build PC Review - 1. Ordering / Stock Issues - 5th July 20
How to Bond With Your Budgie / Parakeet With Morning Song and Dance - 5th July 20
Silver Price Trend Forecast Summer 2020 - 3rd Jul 20
Silver Market Is at a Critical Juncture - 3rd Jul 20
Gold Stocks Breakout Not Confirmed Yet - 3rd Jul 20
Coronavirus Strikes Back. But Force Is Strong With Gold - 3rd Jul 20
Stock Market Russell 2000 Gaps Present Real Targets - 3rd Jul 20
Johnson & Johnson (JNJ) Big Pharma Stock for Machine Learning Life Extension Investing - 2nd Jul 20
All Eyes on Markets to Get a Refreshed Outlook - 2nd Jul 20
The Darkening Clouds on the Stock Market S&P 500 Horizon - 2nd Jul 20
US Fourth Turning Reaches Boiling Point as America Bends its Knee - 2nd Jul 20
After 2nd Quarter Economic Carnage, the Quest for Philippine Recovery - 2nd Jul 20
Gold Completes Another Washout Rotation – Here We Go - 2nd Jul 20
Roosevelt 2.0 and ‘here, hold my beer' - 2nd Jul 20
U.S. Dollar: When Almost Everyone Is Bearish... - 1st Jul 20
Politicians Prepare New Money Drops as US Dollar Weakens - 1st Jul 20
Gold Stocks Still Undervalued - 1st Jul 20
High Premiums in Physical Gold Market: Scam or Supply Crisis? - 1st Jul 20
US Stock Markets Enter Parabolic Price Move - 1st Jul 20
In The Year 2025 If Fiat Currency Can Survive - 30th Jun 20
Gold Likes the IMF Predicting a Deeper Recession - 30th Jun 20
Silver Is Still Cheap For Now - 30th Jun 20
More Stock Market Selling Ahead - 30th Jun 20
Trending Ecommerce Sites in 2020 - 30th Jun 20
Stock Market S&P 500 Approaching the Precipice - 29th Jun 20
APPLE Tech Stock for Investing to Profit from the Machine Learning Mega trend - 29th Jun 20
Student / Gamer Custom System Build June 2020 Proving Impossible - Overclockers UK - 29th Jun 20
US Dollar with Ney and Gann Angles - 29th Jun 20
Europe's Banking Sector: When (and Why) the Rout Really Began - 29th Jun 20
Will People Accept Rampant Inflation? Hell, No! - 29th Jun 20
Gold & Silver Begin The Move To New All-Time Highs - 29th Jun 20
US Stock Market Enters Parabolic Price Move – Be Prepared - 29th Jun 20
Meet BlackRock, the New Great Vampire Squid - 28th Jun 20
Stock Market S&P 500 Approaching a Defining Moment - 28th Jun 20

Market Oracle FREE Newsletter

AI Stocks 2020-2035 15 Year Trend Forecast

The Bearish Gold Bull

Commodities / Gold and Silver 2010 Jul 14, 2010 - 08:58 AM GMT

By: Neil_Charnock

Commodities

Best Financial Markets Analysis ArticleI have taken some excerpts from our new GoldOz Newsletter service to construct this article.  Even the hedge funds boys are reportedly dazed by market action after their worst performance in 18 months during May.  Has it been difficult to assess the markets this year?   No it has been extremely hard.   This is firstly because of the political and regulatory changes that are clouding the picture.  The second difficulty is that we are transitioning into a new financial world and I do not say this lightly.  


Take Greece for example where there are riots in the streets and default hangs directly overhead.  They need strong growth to provide an economy that can pay back debt and thereby overcome chronic deficits.  Yet SME’s (Small to Medium Enterprises) have only been able to borrow €85M in the past 6 months to end June this year and at a whopping 22% average interest rate.  In 2009 by contrast they borrowed €900M.

Changes are part of the system and quite normal.  What we refer to is different I assure you.  In general terms most people are chronically bad at change therefore the adjustment will be confusing and painful for many.   What was the old normal and why am I talking about this?  It has huge ramifications for gold that’s why.  I am discussing an essential reason for gold to go up and the timing of such an event.

 Spot Gold chart: 5 years / weekly
Even more than that; I am examining the likely pathway because there is potentially a massive pot hole ahead.

Gold in USD’s looks vulnerable on a technical basis here so be careful.   It is sitting in a bearish rising wedge as shown in this chart.   The black overhead lines on price, RSI and MACD are showing a negative divergence which has also crossed to the negative.

This may not play out in other currencies however the USD is the dominant currency as recognized by the international investment community.  Unless we break above this rising wedge soon there is danger of a deleveraging induced sell off in gold, equities and anything else that has a bid.  This year has marked exceptional volatility due to a gradual deleveraging process which could accelerate at any time if circumstances push the markets over the edge.  If we break to the downside through that rising support line in under the gold price we will have to look for likely support levels.

To ascertain what might cause such an event when the fundamentals are clearly in favour of gold we have to look to the global debt markets.  First of all what was the” old normal”? 

People have been getting accustomed to a never ending diet of debt issuance since Nixon reneged on the convertibility of USD’s into gold on August 15th 1971.  Since then the money supply has exploded along with unsustainable life styles as consumption was brought forward in time.  Most consumers have bought the line that wealth can be borrowed and that you can live the lifestyle you want before you save or earn the money.  They have bought the lie that debt will be there for the taking forever and that governments and central bankers will look after everything.  No wonder we don’t want to face any new reality because we may have to look after ourselves now.

History also shows there was an earlier chapter from 1913 when the US Federal Reserve was formed.  Debt began to explode after 1913 after a remarkably stable 100 years where inflation was not a problem like it has been ever since. 

The new beginning of a brave new world started in 2000 however it accelerated with a down turn in in late 2007 with a justified lack of confidence.   By 2009, after unprecedented monetary inflation the money supply began to contract.  Liquidity has been steadily drying up ever since.  Money supply has begun to contract because the world has maxed out its credit limits.  So have the lenders and now the great credit contraction begins. 

This has the unfortunate potential to turn into the credit squeeze from hell initially forcing massive deleveraging.   This may be great for gold in the longer run because it sets up sovereign default scenarios which will severely damage confidence in global financial markets.   We may make a great deal of money out of gold and eventually gold stocks however the social consequences are highly unfortunate.

In the short term stagflation will be the inevitable result as some asset classes fall sharply (read de-leveraging) while we simultaneously face rising interest rates.  This last point often confuses investors however it will come to pass baffling many and causing them to miss the best opportunities.  This whole situation has profound influence on investing in the “new” economy as well as gold stocks and gold.

The global bond markets have been influenced by huge bond and sovereign funds which amass investor funds and play the bond markets.  This has provided vital capital for corporations and governments alike as the debt bubble grew.  This monstrous pool of capital is now starting to seek a new home and the effect will be immense.  We can take advantage of this capital wave as it seeks yield in a low yield world.

To be clear I am stating that I believe the debt crisis in Europe cannot do anything but spread confirming the IMF’s worst fears as they announce their forecast of 4.5% global growth this year.  Their huge caveat and the massive growth assumptions made by governments startle this analyst.  The largest sovereign funds have declared that bonds are dead due to the absurd volume of issuance due in the next few years.  This is incredibly important because the capital flows and effects will be immense.  Given their past support for the debt markets is no longer palatable it will be steadily withdrawn.   It beggars belief that anybody could believe the cost of capital will not increase dramatically.  Who is going to buy all that debt?   More on this topic and Australian gold stocks is for subscribers only.

Good trading / investing.
Regards,

Neil Charnock

www.goldoz.com.au

GoldOz has now introduced a major point of difference to many services.  We offer a Newsletter, data base and gold stock comparison tools plus special interest files on gold companies and investment topics.  We have expertise in debt markets and gold equities which gives us a strong edge as independent analysts and market commentators.  GoldOz also has free access area on the history of gold, links to Australian gold stocks and miners plus many other resources.

Neil Charnock is not a registered investment advisor. He is an experienced private investor who, in addition to his essay publication offerings, has now assembled a highly experienced panel to assist in the presentation of various research information services. The opinions and statements made in the above publication are the result of extensive research and are believed to be accurate and from reliable sources. The contents are his current opinion only, further more conditions may cause these opinions to change without notice. The insights herein published are made solely for international and educational purposes. The contents in this publication are not to be construed as solicitation or recommendation to be used for formulation of investment decisions in any type of market whatsoever. WARNING share market investment or speculation is a high risk activity. Investors enter such activity at their own risk and must conduct their own due diligence to research and verify all aspects of any investment decision, if necessary seeking competent professional assistance.

Neil Charnock Archive

© 2005-2019 http://www.MarketOracle.co.uk - 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

6 Critical Money Making Rules