Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold Bugs: Who's Crazy Now?

Commodities / Gold & Silver Mar 05, 2008 - 01:09 AM GMT

By: Joe_Nicholson

Commodities

March 2nd update for members - “Though it seems a stall in the rally may be ahead if the Fed continues to jawbone the issue of inflation, I am compelled to revise my charts in a decidedly bullish fashion.” ~Precious Points: The Bubble Inside the Bubble, February 23, 2008

There was a time, not all that long ago, when being a “gold bug” carried the stigma of being a bit on the fringe, when accumulating physical metal was deemed akin to building and stocking an underground bunker complete with canned beans and tinfoil hats.


When eventually rumors of a crisis in credit-backed derivatives and a pending devaluation of the dollar began arriving regularly in the mail on glossy pseudo-newsprint ads that advised the movement of capital overseas, the talking heads of the corporate news channels were still singing the praises of an unstoppable bull market and a Goldilocks economy even as they made “liquidity” a household word. And then, as everything predicted by the lunatic gold bugs started to come true, the newly named Fed Chairman and Treasury Secretary were busy spinning tales of a “soft landing”, assuring a fawning public the economy was sound and that “subprime” would not “spill over.” Remember that?

Anyone who's read The Mogambo Guru knows the twinge on insanity, if not outright psychosis, that used to be the unique hallmark of the precious metals bulls, but which today seems to characterize the economic optimists and anyone else who believes deficits don't matter or that inflation expectations are well anchored.

But for all the talk of financial Armageddon, my own record of published articles to date has been relatively conservative in championing precious metals as simply a sound investment without recourse to disastrous end-of-the-world scenarios. If you were fortunate enough to buy gold on the day President Nixon ended the gold standard, and wise enough to hold it, you've seen your investment rise 2,700%. As Warren Buffet will tell you, that's market outperformance.

Well, it was an unabashedly bullish week for precious metals and, in fact, commodities of all kinds. And, where last week's update stressed the possibility of a hawkish Fed in light of hot inflation data, the green light for metals came on Tuesday when Vice-Chair Kohn explicitly described the downside risks to financial markets and the economy as “the greater threat to economic welfare in the United States ", over inflation.

By his own admission, the central bank stands ready to prevent "an especially adverse outcome," he said. But given, recent history, do these officials have any credibility whatsoever? And even if he is correct, isn't the solution of re-inflating the housing market only going to accelerate the advance of precious metals?

Both charts from last week treated $1000 gold as an inevitability, with the only contention being whether there would a correction or consolidation beforehand. If, as some suspect, the coming week becomes a continuation of Friday's volatility, then gold probably will come under some selling pressure as profits are taken wherever they're had. How this or any situation is handled depends on the timeframes and investment vehicles being used, but long term accumulators of physical metal and even swing traders will consider any such liquidation to be a gift.

The same is true for silver, where those waiting around for prices closer to $10 will be on hold indefinitely as news of hitting $20 is barely mentioned in mainstream media. Most likely there will be consolidation under $20 if stocks continue their slide, think 4 th wave, but even the best case scenario for the bears is a pullback to about $14, and that would still be a confirmation of the larger bull market. After that, the sky's the limit. Unless you believe the Fed is going to start raising rates by the end of the year and soak up the excess liquidity. Ummm, who's crazy now?

by Joe Nicholson (oroborean)

www.tradingthecharts.com

This update is provided as general information and is not an investment recommendation. TTC accepts no liability whatsoever for any losses resulting from action taken based on the contents of its charts,, commentaries, or price data. Securities and commodities markets involve inherent risk and not all positions are suitable for each individual.  Check with your licensed financial advisor or broker prior to taking any action.

Joe Nicholson Archive

© 2005-2022 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