Best of the Week
Most Popular
1.Stock Market in DANGER of Strangling the Bears to Death - Nadeem_Walayat
2. Germany Pivoting East, Exit US Dollar, Enter Gold Standard - Jim_Willie_CB
3.Flight MH17 – Kiev Flash Mob's Last False Flag? - Andrew_McKillop
4.Stock Market Crash Nightmare! - Nadeem_Walayat
5.Gold - The Million DOLLAR Question... - Rambus_Chartology
6.Gold And Silver – BRICS And Germany Will Pave The Way - Michael_Noonan
7.The Jewish Selfish Gene, People Chosen by God, Everyone Else is Goyim to Kill - Nadeem_Walayat
8.The Israeli Promised Land Dream - The Criminal Roadmap Towards “Greater Israel”? - Felicity Arbuthnot
9.Which Way is Inflation Blowing? Watch Commodities - Gary_Dorsch
10.U.S. Economy Quarterly Review and Implications for 2014-2015 - Lacy Hunt
Last 5 days
The Three Stocketeers: One for All and... - 2nd Aug 14
Significant Day in the Bitcoin Market - 2nd Aug 14
Gold Prices 1971 - 2014 in 3 Waves - 2nd Aug 14
Gold’s Seasonal Sweet Spot - Strongest Months Are August, September, November And January - 1st Aug 14 - GoldCore
Flagrant Rush To War In The Ukraine Crisis - 1st Aug 14
What Russian Sanctions Mean for Your Money - 1st Aug 14
The West's Reckless Rush Towards War with Russia - 1st Aug 14
Gold Price Advance Capped by the Dead Cat Dollar’s Recovery - 1st Aug 14
Big Banks Shift to Lower Gear Banking Operations - 1st Aug 14
Africa: New Land of Investor Opportunity? Pointing to the Positives - 1st Aug 14
Turning a Clinical Eye on Biotech Stocks with High Potential Investor Reward - 1st Aug 14
Gaza Death Cloud Hangs Over Sheffield Eid Festival 2014 at Millhouses Park - 1st Aug 14
Israels Final Solution of Turning Gaza Concentration Camp into a Grave Yard - 31st July 14
US Failure: Unintended Consequence - 31st July 14
Stock Market Breakdown! - 31st July 14
Echoes Of The Great War – Only An Echo In The Elite Mind - 31st July 14
This is Bad News for U.S. Economy and Stock Markets - 31st July 14
The Important Impact of This “Secret” Gold Agreement - 31st July 14
The Something For Nothing Society Death Spiral - 31st July 14
The Social Memory Dump, Shredding Society - 31st July 14
How Safe Are Unallocated Gold Bullion Accounts? - 31st July 14
USDJPY Big Bear Market - 31st July 14
No More School in Gaza Because All the Children are Dead Chant Israel's Jewish Fundementalists - 31st July 14
The Iron Dome Inside The Heads of Israel’s Leaders - 31st July 14
You Know a Politician or Talking Head is Clueless When….. - 31st July 14
Don't Get Married to Your Gold Stocks—It's a Performance-Based Relationship - 31st July 14
Stock Market Parabolic Collapse - Sowing the Seeds of the Next Depression - 30th July 14
How to Profit from the Russia Ukraine Conflict - 30th July 14
Greenspan: U.S. Economy Running Out of Buffer; Stock Market to See Significant Correction - 30th July 14
Rogue States And Loony Tunes - 30th July 14
Anne Elk’s Theory On Brontosauruses - 30th July 14
Our Totalitarian Future - Totalitarianism NOW! - 30th July 14
Stocks Bear Market Formation Revealed - 30th July 14
We Just Found “The Future” - 30th July 14
What the “Steak Bandit” Says About Asset Values - 30th July 14
Designer War By Default - Seven Types of Elite Madness - 30th July 14
Death of the U.S. Dollar? Gold an Inflation Hedge? Really? - 29th July 14
We’re Ready to Profit in the Coming Gold Price Correction—Are You? - 29th July 14
Their Economy Will Collapse, Including Ours - 29th July 14
Silver Prices – Megaphone Patterns - 29th July 14
Real U.S. Interest Rates - Fed Exit a Blue Pill? - 29th July 14
Why Israel Should NOT Exist, Just Like Any Other Rogue State - 29th July 14
Gold Still Looking Good - 29th July 14
Silver Price Set To Star - 29th July 14
Our Population Growth Totalitarian Future - 29th July 14
World War 1 Cause and Consequences - The Planned Destruction of Christendom - 29th July 14
Will Crashing Commodities Crash the Stock Market? - 29th July 14
Ukraine MH17 - Washington Thinks Americans Are Fools - 29th July 14
Stock Market Bubble Warning - 29th July 14
Gold Price and U.S. Dollar’s July Rally - 28th July 14
Second Quarter Corporate Earnings: Marching Toward a Strong Economic Recovery - 28th July 14
Time to Put a New Economic Tool in the Box - 28th July 14
Mossad in Gaza, Ukraine and the Cult Of The All-Powerful Elite - 28th July 14
Elliott Wave Gold Price Projection Since 1970 - 28th July 14
Investors Remain Uncertain As Stock Fluctuate Near Long-Term Highs - Will The Uptrend Extend? - 28th July 14
The Mass Psychology Of Decline - 28th July 14
Will the US Destroy the World? - Don’t Expect to Live Much Longer - 28th July 14
GDM and GDXJ Gold Stocks In-depth Look - 28th July 14
Stock Market One FINAL High? - 28th July 14
What It Means - Paradigm Collapse And Culture Crisis - 27th July 14
Wall Street Shadow Banking: You Can’t Taper a Ponzi Scheme: “Time to Reboot” - 27th July 14
6 Tips for Picking Winning Gold Mining Stocks - 27th July 14
Israel's War on Children, Exterminating the Palestinians Future - 27th July 14
Guilt By Insinuation - How American Propaganda Works - 26th July 14
Surprise Nuclear Attack On Russia To Liberate Ukraine - 26th July 14
Use "Magic" Of Gold/Silver Ratio To Greatly Increase Your Physical Holdings - 26th July 14
Derivatives Market Species Origins - Abuse, Props and Risks - 26th July 14
Stock Market Manipulation and Technical Analysis - 26th July 14
China’s Stock Market Finally Looks Like A Buy - 26th July 14
Ed Milliband Fears Israel Jewish Fundamentalist Gaza War Massacres Backlash - 26th July 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

The Biggest lie in Stock Market History Revealed

Gold and The Fiscal Cliff

Commodities / Gold and Silver 2012 Dec 30, 2012 - 09:09 AM GMT

By: Clif_Droke

Commodities

The price of gold has been hit by selling under concerns over the upcoming U.S. "fiscal cliff." At least that's what the news media's explanation for gold's decline has been. Here's what Reuters had to say in a recent news article:

"U.S. stocks sold off late in the day to close at session lows on Wednesday as talks to avert a year-end fiscal crisis turned sour, even as investors still expect a deal....


"President Barack Obama and congressional Republicans are struggling to come up with a deal to avoid early 2013 tax hikes and spending cuts that many economists say could send the U.S. economy into recession."

Now here's the problem with trying to apply "rational" analysis of the news headlines in making gold price predictions: because the financial markets are by nature irrational and volatile, you can never know from one day to the next how the market will react to a certain piece of news or legislation.

For instance, doesn't it make sense that if the U.S. falls off the fiscal cliff and a recession is thereby caused that gold would benefit from the safe haven inflows that would surely follow? Logic dictates that scared investors would transfer money from equities and into gold and gold equivalents to escape the punishment that paper assets would presumably suffer in a fiscal cliff scenario. But as we've seen all too many times in the past, the market isn't always logical.

All of this is by way of preface to a point that I've made many times in this newsletter, namely that the best approach to gold is a trading approach which involves buying only when the technical conditions are clearly ripe for a rally. And we haven't had a technical buy signal for gold lately.

Fundamental analysis, while helpful at times, is no substitute for a good technical discipline. That's why gold with all its bullish longer-term fundamentals can be under selling pressure in the short term. It doesn't really matter what the actual reason is; the only "reason" we need concern ourselves with is that right now there are more sellers than buyers. Until this situation reverses we'll remain in cash and let the gold market sort itself out.

It has been reported that John Paulson's hedge fund group holds $3.67 billion in shares of the SPDR Gold Trust (GLD). In July, gold-related assets of one of his funds comprised 44% of total assets. As one analyst has observed, "The big correction in the mining stocks has hurt his performance and reputation." Businessweek reported that two of Paulson's largest funds, Paulson Advantage and Advantage Plus, lost 36 percent and 52 percent in 2011. The two flagship funds are down 6.3 percent and 9.3 percent as of the end of May with losses continuing into July.

Paulson is a giant of sorts in the hedge fund world. He made a $25 billion fortune for his hedge fund investors during the 2008 credit crisis. Although Paulson is widely regarded as a true hedge fund king, his mistiming of the gold market has cost him dearly in the near term. While it's very possible (I would even say likely) that Paulson will eventually be proven correct on his big bet on gold, the point is that you can be the greatest hedge fund trader on Wall Street and still get punished by Mr. Market for ignoring the short-term technicals in preference for the longer-term fundamentals. Technicals rule over fundamentals in the short term. Investors ignore this truism at their peril.

Now having said all this, there's a chance that the fiscal cliff resolution could turn out to be favorable for gold. We'll let the price and volume action of the gold ETFs speak for us, and a 2-day higher close above the 15-day moving average would speak very loudly indeed.

I note with interest that the aforementioned SPDR Gold Trust (GLD) is hovering slightly under its 150-day (30-week) moving average and is trying to re-establish support around it. Long-time readers of this report will remember the importance I attached on this longer-term trend line during the boom years of 2009-2011, for the gold ETF always respected the 150-day MA as the proverbial "line in the sand" during corrections in those years. During the entirety the 2009-2011 rally, the gold ETF never once penetrated the 150-day MA until late 2011 when the last bull swing ended.

GLD Daily Chart

Since then GLD has fluctuated above and below the 150-day MA. It tried to establish a new long-term base of support above it in this past summer's rally and is now testing this vital trend line once again. Note also the extremely high amount of trading volume in GLD that occurred between Dec. 18 and Dec. 20. This could be a sign of investor capitulation, i.e. a "selling climax," which in turn would be a bullish sign for the interim gold outlook. I'd view as very favorable the prospects for a first quarter rally if GLD manages to get back above the 150-day MA next week.

2014: America's Date With Destiny

Take a journey into the future with me as we discover what the future may unfold in the fateful period leading up to - and following - the 120-year cycle bottom in late 2014.

Picking up where I left off in my previous work, The Stock Market Cycles, I expand on the Kress cycle narrative and explain how the 120-year Mega cycle influences the market, the economy and other aspects of American life and culture. My latest book, 2014: America's Date With Destiny, examines the most vital issues facing America and the global economy in the 2-3 years ahead.

The new book explains that the credit crisis of 2008 was merely the prelude in an intensifying global credit storm. If the basis for my prediction continue true to form - namely the long-term Kress cycles - the worst part of the crisis lies ahead in the years 2013-2014. The book is now available for sale at:

http://www.clifdroke.com/books/destiny.html

Order today to receive your autographed copy and a FREE 1-month trial subscription to the Momentum Strategies Report newsletter.

By Clif Droke
www.clifdroke.com

Clif Droke is the editor of the daily Gold & Silver Stock Report. Published daily since 2002, the report provides forecasts and analysis of the leading gold, silver, uranium and energy stocks from a short-term technical standpoint. He is also the author of numerous books, including 'How to Read Chart Patterns for Greater Profits.' For more information visit www.clifdroke.com

Clif Droke Archive

© 2005-2014 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

Free Report - Financial Markets 2014