Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Biggest Inflation Threat in 40 Years Looms over Markets - 13th Apr 21
How to Get Rich with the Pareto Distribution - Tesco Example - 13th Apr 21
Litecoin and Bitcoin-Which Is Better? - 13th Apr 21
The Major Advantages Of Getting Your PhD Online - 12th Apr 21
Covid-19 Pandemic Current State for UK, US, Europe, Brazil Vaccinations vs Lockdown's Third Wave - 12th Apr 21
Why These Stock Market Indicators Should Grab Your Full Attention - 12th Apr 21
Rising Debt Means a Weaker US Dollar - 12th Apr 21
Another Gold Stocks Upleg - 12th Apr 21
AMD The ZEN Tech Stock - 12th Apr 21
Overclockers UK Build Quality - Why Glue Fan to CPU Heat sink Instead of Using Supplied Clips? - 12th Apr 21 -
What are the Key Capabilities You Should Look for in Fleet Management Software? - 12th Apr 21
What Is Bitcoin Gold? - 12th Apr 21
UK Covd-19 FREE Lateral Flow Self Testing Kits How Use for the First Time at Home - 10th Apr 21
NVIDIA Stock ARMED and Dangeorus! - 10th Apr 21
The History of Bitcoin Hard Forks - 10th Apr 21
Gold Mining Stocks: A House Built on Shaky Ground - 9th Apr 21
Stock Market On the Verge of a Pullback - 9th Apr 21
What Is Bitcoin Unlimited? - 9th Apr 21
Most Money Managers Gamble With Your Money - 9th Apr 21
Top 5 Evolving Trends For Mobile Casinos - 9th Apr 21
Top 5 AI Tech Stocks Investing 2021 Analysis - 8th Apr 21
Dow Stock Market Trend Forecast 2021 - Crash or Continuing Bull Run? - 8th Apr 21
Don’t Be Fooled by the Stock Market Rally - 8th Apr 21
Gold and Latin: Twin Pillars of Western Rejuvenation - 8th Apr 21
Stronger US Dollar Reacts To Global Market Concerns – Which ETFs Will Benefit? Part II - 8th Apr 21
You're invited: Spot the Next BIG Move in Oil, Gas, Energy ETFs - 8th Apr 21
Ladies and Gentlemen, Mr US Dollar is Back - 8th Apr 21
Stock Market New S&P 500 Highs or Metals Rising? - 8th Apr 21
Microsoft AI Azure Cloud Computing Driving Tech Giant Profits - 7th Apr 21
Amazon Tech Stock PRIMEDAY SALE- 7th Apr 21
The US has Metals Problem - Lithium, Graphite, Copper, Nickel Supplies - 7th Apr 21
Yes, the Fed Will Cover Biden’s $4 Trillion Deficit - 7th Apr 21
S&P 500 Fireworks and Gold Going Stronger - 7th Apr 21
Stock Market Perceived Vs. Actual Risks: The Key To Success - 7th Apr 21
Investing in Google Deep Mind AI 2021 (Alphabet) - 6th Apr 21
Which ETFs Will Benefit As A Stronger US Dollar Reacts To Global Market Concerns - 6th Apr 21
Staying Out of the Red: Financial Tips for Kent Homeowners - 6th Apr 21
Stock Market Pushing Higher - 6th Apr 21
Inflation Fears Rise on Biden’s $3.9 TRILLION in Deficit Spending - 6th Apr 21
Editing and Rendering Videos Whilst Background Crypto Mining Bitcoins with NiceHash, Davinci Resolve - 5th Apr 21
Why the Financial Gurus Are WRONG About Gold - 5th Apr 21
Will Biden’s Infrastructure Plan Rebuild Gold? - 5th Apr 21
Stocks All Time Highs and Gold Double Bottom - 5th Apr 21
All Tech Stocks Revolve Around This Disruptor - 5th Apr 21
Silver $100 Price Ahead - 4th Apr 21
Is Astra Zeneca Vaccine Safe? Risk of Blood Clots and What Side Effects During 8 Days After Jab - 4th Apr 21
Are Premium Bonds A Good Investment in 2021 vs Savings, AI Stocks and Housing Alternatives - 4th Apr 21
Penny Stocks Hit $2 Trillion - The Real Story Behind This "Road to Riches" Scheme - 4th Apr 21
Should Stock Markets Fear Inflation or Deflation? - 4th Apr 21
Dow Stock Market Trend Forecast 2021 - 3rd Apr 21
Gold Price Just Can’t Seem to Breakout - 3rd Apr 21
Stocks, Gold and the Troubling Yields - 3rd Apr 21
What can you buy with cryptocurrencies?- 3rd Apr 21
What a Long and Not so Strange Trip it’s Been for the Gold Mining Stocks - 2nd Apr 21
WD My Book DUO 28tb Unboxing - What Drives Inside the Enclosure, Reds or Blues Review - 2nd Apr 21
Markets, Mayhem and Elliott Waves - 2nd Apr 21
Gold And US Dollar Hegemony - 2nd Apr 21
What Biden’s Big Infrastructure Push Means for Silver Price - 2nd Apr 21
Stock Market Support Near $14,358 On Transportation Index Suggests Rally Will Continue - 2nd Apr 21
Crypto Mine Bitcoin With Your Gaming PC - How Much Profit after 3 Weeks with NiceHash, RTX 3080 GPU - 2nd Apr 21
UK Lockdowns Ending As Europe Continues to Die, Sweet Child O' Mine 2021 Post Pandemic Hope - 2nd Apr 21
A Climbing USDX Means Gold Investors Should Care - 1st Apr 21
How To Spot Market Boom and Bust Cycles - 1st Apr 21
What Could Slay the Stock & Gold Bulls - 1st Apr 21
Precious Metals Mining Stocks Setting Up For A Breakout Rally – Wait For Confirmation - 1st Apr 21
Fed: “We’re Not Going to Take This Punchbowl Away” - 1st Apr 21
Mining Bitcoin On My Desktop PC For 3 Weeks - How Much Crypto Profit Using RTX 3080 on NiceHash - 31st Mar 21
INFLATION - Wage Slaves vs Gold Owners - 31st Mar 21
Why It‘s Reasonable to Be Bullish Stocks and Gold - 31st Mar 21
How To Be Eligible For An E-Transfer Payday Loan? - 31st Mar 21
eXcentral Review – Trade CFDs with a Customer-Centric Broker - 31st Mar 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Gold Price About to Pull Back

Commodities / Gold & Silver Feb 06, 2008 - 01:14 AM GMT

By: Brian_Bloom

Commodities

Best Financial Markets Analysis ArticleThe charts are not telling a particularly happy story at present.

The attached chart (decisionpoint.com ) tells me that $XAU may start to rise sharply relative to gold. More likely, because the shares have been underperforming, the gold price is likely to pull back sharply relative to shares. The shares may have been right all along.


What's the message in this?

Australia and the UK are facing rising interest rates because we have internal inflation. By contrast, the Fed is cutting, cutting and cutting further.

It “feels” to me like the velocity of money is slowing in the US and the Fed is desperately trying to push on a string.

I remain convinced that the issue is eroding underlying “wealth creation” momentum. The engine began to stall in the 1980s and the Fed opened the spigots to artificially stimulate the world economy. The analogy is Sylvester Stallone on steroids.  There's a limit to what you can expect the steroids to achieve. Ultimately the fossil fuel driven economic cycle has been ageing and the “decision makers” delayed the birth of the newborn and robustly bawling baby in the 1990s when they failed to ratify Kyoto . Peak Oil has passed and oil will be replaced by ……………………. drum roll …………………… what?

Now we're about to face the consequences of that short sightedness. As an example, South Africa , once the most economically powerful country on the African continent, is now experiencing daily electricity brown-outs across the entire country. The place is sitting, literally, on a gold mine and it can't produce enough energy to get the stuff out of the ground in an efficient manner anymore. Mine management is scared to send the miners underground for fear that they will get trapped there. Forget about the hoists that won't be reliable anymore. It gets damned hot far below the surface of the earth when the air conditioning is switched off.

But let's get back to interest rates.

See that lonely little bar that submerged below the 42 level briefly and the next one that bobbed up robustly above the surface. The gap looks suspiciously like a gap island reversal to me. How can Australia have had 11 straight rises in interest rates and the Fed think that it can operate in a vacuum by cutting short rates?

The monthly chart of the PMO is saying ‘Uh uh. Sorry sport, but I don't think we, the market, can allow further falls.'

The low on the bar of that gap island reversal on the daily yield chart looks like it may be a double bottom bounce on the monthly yield chart given the series of rising bottoms on the PMO.

So what's the market telling us?

Well, its different strokes for different folks, and also on what colour spectacles you are wearing, but it's telling this analyst the following.

  • The double whammy impact of a world wide credit crunch and cost push inflation is causing other countries outside the US to have to raise rates.
  • The Fed is feverishly stoking the embers of a dying fire where the charcoal may be turning to ash – because the people who “control” the decisions in the USA – the oil and banking industries – zigged when they should have zagged. They locked the US into yesterday's energy technologies and encouraged the US motor car industry to continue to produce gas guzzlers when the rest of the world was hybridising and going compact. All three of the motor biggies in the US hit the wall at 100 miles an hour. Ouch! There was a time when 1 in 4 people in the USA were gainfully employed in and around the motor car industry. No longer. Now its taking smoke and mirrors just to make the US auto manufacturing industry appear to be solvent.
  • In context that the US is/was generating 23%-25% of the total world economy, it's a matter of time before the US 's pain spills over into the ROW. That's why the gold price is resisting further rises in the short term.

But there's another issue lurking in the background. That issue is:

The US Debt clock just keeps right on ticking along. Tick tock, tick tock.

And George W – God bless his cotton socks – puts forward a $3 trillion budget which “admits” to a $400 billion deficit (over and above what is not being admitted to because it's being swept under the mat. See that lump under the debt mat? See the debt mat rising?).

My bet is that within 12 months of writing these words the US National Debt will be trending towards $10 trillion – because if the velocity of money slows, then income to the US Federal Treasury from taxes on real estate, stock and other origami transactions will begin to shrink – and the US politician's response to this little dilemma has historically been to open the spending spigots. So there will be an upside pressure on spending and a downside pressure on income.

And there are some people who are arguing that we are in a Primary Bull Market? Go figure.

Well, let's be absolutely honest. They may be right. At the end of the day, if there's too much money floating around it will raise the level of everything in the bathtub – right up to the point when the bath starts to overflow – and, if we're not super careful, we may slip on the bathmat and break our necks.

There's a worrying little “sell” signal that has manifested on the PMO of the monthly DJIA, and the price is peeking below its rising trendline ,

Can the price bounce from here? Of course it can! The five man Fed (with one banker amongst them) and the five presidents of the Federal Reserve Banks have, between them, a 6-4 majority on the FOMC – which will be fighting to keep pushing on that string. They don't want the market to start unwinding and they will do everything in their power to raise the level in the bathtub.

I wish them the best of British luck on that one. The more prudent amongst us will have closed the bathroom door on their way out of the building.

As evidence that discretion is the better part of valour, the broader market ($SPX) is looking less optimistic than the manipulable Dow Jones

And what of the Wilshire? (Even broader, with 5,000 stocks)

Yes, it looks oversold on the oscillator, but those of us who can tell up from down are looking at that 200 day Moving Average and are starting to ask some soul searching questions.

Based on the chart below, $878 an ounce is a key support level. (3 X 2% = 6% reversal from the $935 peak). If it is broken, we can probably expect the price to fall further. But, so far, it looks like gold is well entrenched in its bull market. A fall may be nerve wracking but technically it will not be particularly worrying.

So, in summary we seem to be facing decreasing velocity of money which may be nudging the USA to an increasingly moribund US economy, a minimum $400 billion deficit which will quite possibly be closer to double that number by the time the dust has settled, and all this against the background of increasing cost-push world inflation? And the Fed just keeps right on printing, printing, printing and printing.

What do you call it when you keep doing the same thing over and over and over again, and yet you keep expecting a different outcome?

It's enough to bring a tear into the eye of the most seasoned politician.

By Brian Bloom
www.beyondneanderthal.com

Since 1987, when Brian Bloom became involved in the Venture Capital Industry, he has been constantly on the lookout for alternative energy technologies to replace fossil fuels. He has recently completed the manuscript of a novel entitled Beyond Neanderthal which he is targeting to publish by end March 2008.

The novel has been drafted on three levels: As a vehicle for communication it tells the light hearted, romantic story of four heroes in search of alternative energy technologies which can fully replace Neanderthal Fire. On that level, its storyline and language have been crafted to be understood and enjoyed by everyone with a high school education.  The second level of the novel explores the intricacies of the processes involved and stimulates thinking about their development. None of the three new energy technologies which it introduces is yet on commercial radar. Gold, the element , (Au) will power one of them. On the third level, it examines why these technologies have not yet been commerci alised. The answer: We've got our priorities wrong.

Beyond Neanderthal also provides a roughly quantified strategic plan to commerci alise at least two of these technologies within a decade – across the planet.  In context of our incorrect priorities, this cannot be achieved by Private Enterprise. Tragically, Governments will not act unless there is pressure from voters. It is therefore necessary to generate a juggernaut tidal wave of that pressure. The cost will be ‘peppercorn' relative to what is being currently considered by some Governments. Together, these three technologies have the power to lift humanity to a new level of evolution. Within a decade, Carbon emissions will plummet but, as you will discover, they are an irrelevancy. Please register your interest to acquire a copy of this novel at www.beyondneanderthal.com . Please also inform all your friends and associates. The more people who read the novel, the greater will be the pressure for Governments to act.

Copyright © 2008 Brian Bloom - All Rights Reserved

Brian Bloom 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