Best of the Week
Most Popular
1.Election Forecast 2015 - Opinion Polls Trending Towards Conservative Outright Win - Nadeem_Walayat
2.UK Solar Eclipse - End Time Sign, Judgement Day, Doomsday! - Nadeem_Walayat
3.Gold And Silver - When Will Precious Metals Rally? Not In 2015 - Michael_Noonan
4.Preparing for the Next Stocks Bear Market - Forecast 2015-2016 - Gary_Savage
5.Is a Stock Market Crash Imminent? - David Eifrig
6.Gold Price Slumps as US Dollar Soars, What's Next? - Nadeem_Walayat
7.US Dollar Forex Pairs and Gold Chartology - Rambus_Chartology
8.Election Forecast 2015: The Day Labour Lost the General Election - Nadeem_Walayat
9.The ECB Should End QE Next Month - EconMatters
10.Silver Price Poised to Surge - Zeal_LLC
Last 5 days
Deflation Watch: Key U.S. Economic Measures Turn South - 27th Mar 15
The Hard-Earned Truth About Recreational Real Estate - 27th Mar 15
Bitcoin Price Still in Important Territory - 27th Mar 15
Stocks Bear Market Conditions - Index Market Range Warning - 27th Mar 15
BEA Leaves Q4 2014 U.S. GDP Growth Essentially Unchanged at 2.22% - 27th Mar 15
Brazil Economy Victim of Vulgar Keynesianism - 27th Mar 15
Gold to Fuel Silver Price Upleg - 27th Mar 15
Gold and Silver Stocks Will Rise Again! - 27th Mar 15
Risk of ‘World War’ between NATO and Russia on Ukraine as Yemen Bombed - 27th Mar 15
FOMC Minutes Turned The Gold Tide - 27th Mar 15
Sheffield Hallam Election Battle 2015 - Lib Dems Go to War Whilst Labour Sleeps - 27th Mar 15
Gold Effect On Mining & Shale Wasteland - 27th Mar 15
How Stock Investors Should Play the 2016 Presidential Race - 26th Mar 15
MidEast Energy Alert: Why the Crisis in Yemen Could Get Ugly Very Fast - 26th Mar 15
Stock Market Downward Spiral of Dumbness - 26th Mar 15
The Monetary Approach Reigns Supreme - 26th Mar 15
Stock Market Large Gap Down, Despite the Algos' Push Back - 26th Mar 15
Crude Oil Surges, Gold price Spikes as Middle East Tensions Escalate - 26th Mar 15
The U.S. Housing Market Recovery Is Fabricated Optimism - 26th Mar 15
Why Yemen Is The Next Saudi-Iranian Battleground - 26th Mar 15
The Crude Oil Price Crash and China Economic Slow Down - 26th Mar 15
Global Financial Markets Are More Distorted Than Ever Before - 26th Mar 15
One More Stock Market Rally and Then a Huge Drop Expected - 26th Mar 15
Danger Will Robinson - Stock Market Crash Warning - 25th Mar 15
Learn the Basics of Corrective Elliott Waves - 25th Mar 15
Why CNBC Is Hazardous to Your Financial Health! - 25th Mar 15
Will Your Retirement Accounts Survive The Coming Tax Code "Revolution"? - 25th Mar 15
US Dollar - Americas Phoenix - 25th Mar 15
California’s Epic Drought: Only One Year of Water Left! - 25th Mar 15
What’s Wrong With Silver? - 25th Mar 15
SPX Futures Appear Weak. WTIC and Gold May Be at Max Retracement - 25th Mar 15
We’re at the Dawn of a “New Energy Age” - 25th Mar 15
A Very Weak U.S. Economic Recovery - 25th Mar 15
Zero UK CPI Inflation Rate Prompts Deflation Danger Propaganda For Fresh Money Printing - 25th Mar 15
Stock Market NYSE Hi-Lo Index Aggressive Sell Signal - 24th Mar 15
Palladium Commodity Price Forecast - 24th Mar 15
Bitcoin Price Gearing Up for a Fall - 24th Mar 15
Safety Deposit Boxes In UK Being Closed By ‏HSBC – Not Closing Gold Vaults - 24th Mar 15
Japan Short Term Gains And Long Term Disaster - 24th Mar 15
China's Fragile Evolution - 24th Mar 15
David Cameron Announces Resignation Even Before Being Re-elected, Handing Labour 6 Seats - 24th Mar 15
City of London's Ownership of American Colonies - 24th Mar 15
Stock Market Reversal May Have Begun - 24th Mar 15
Casey Gathers Top Gold Experts to Share Secrets for Making Money in Any Market - 24th Mar 15
Thoughts on The Current Crude Oil Market - 24th Mar 15
U.S. Economy Still on Life Support - What Your Governments Hiding From You... - 24th Mar 15
UK Election Forecast 2015 - Budget Bribes Fail, SNP Insurgency Catastrophe - Video - 24th Mar 15
Is Stock Market Minor Top Taking Hold? - 23rd Mar 15
Greece and EU Running Out of Time as Bank Runs Intensify - 23rd Mar 15
Stock Market Slightly Negative Expectations Following Last Week's Rally - 23rd Mar 15
This Rising Interest Rates Play Could Make You a Quick 55% - 23rd Mar 15
Platinum Commodity Price False Break Low - 23rd Mar 15
The Real Reason The American Dream is Unraveling - 23rd Mar 15
Election Forecast 2015 - Budget Bribes Fail to Impress Voters, Tory's Lose Seats in Opinion Polls - 23rd Mar 15
Silver Price Reliance During U.S. Dollar Rally - 23rd Mar 15
Gold Price Outlook Dramatic Improvement Following US Dollar Topping Action - 23rd Mar 15
Wall Street Doesn't Want You to Do This - 22nd Mar 15
The "Natural Interest Rate" Is Always Positive and Cannot Be Negative - 22nd Mar 15
Exploring The Gold Market: The Fed, The Charts. The COTS and GLD - 22nd Mar 15
Stocks Bull Market Continues - 22nd Mar 15
Gold And Silver - China's AIIB Spells U.s. Dollar Demise, Not Clear For Precious Metals - 22nd Mar 15
Cocoa Commodity Price Technical Outlook - 21st Mar 15
Yield Curve, Futures, Suggest No U.S. Interest Rate Hike Until December - 21st Mar 15
Three Iconic Stocks Are Poised for a Dive - 21st Mar 15
We're All Hedge Funds Now! - 21st Mar 15
Why Stock Market Seasonality May Be Critical in 2015 - 20th Mar 15
Yellen's Tiger Riding Dilemma Keeps Interest Rates Near Zero - 20th Mar 15
FOMC is boxed in, Gold and Silver - 20th Mar 15
Silver Price Poised to Surge - 20th Mar 15
Why Aren’t These Investors Worried About The Gold Price? - 20th Mar 15
Gold Price Downside $850/oz; Upside Jump to $2,000/oz on ‘Grexit’ - 20th Mar 15
Cheap Paper Money - Precious Metals Technical Outlook - 20th Mar 15
Best Cash ISA vs Budget 2015 Scrapping Tax on Savings Interest on First £1,000 - 20th Mar 15
GDXJ / Gold Ratio - 20th Mar 15
What the “Yellen Effect” Ultimately Means for Crude Oil - 20th Mar 15
Sharp Fall In USD Index And Its Implications - 20th Mar 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

US Economy Still on Life Support

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

© 2005-2015 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