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Market Alert
May 7, 2013, 10:40 AMThese are the opening paragraphs of today's Market Alert:
Gold started the day by declining and the rest of the precious metals sector followed. Everything that we wrote in yesterday's Market Alert and Friday's Premium Update remains up-to-date.
There is an interesting interview on gold on finance.yahoo.com today.
In the interview, Mr. Swedroe makes that point that the loose monetary policy (which is a polite understatement, in our view, to describe what's going on) may eventually lead to inflation (our take is that it virtually has to happen) and if Fed tightens the monetary policy, gold will plunge. We doubt that it will happen anytime soon. Even if it does, please keep in mind that over 30 years ago gold rallied for months after Paul Volcker raised rates substantially.
Gold may not be a hedge in the short-term, or medium-term or even long-term in some cases - but in very long term it preserves the real value. Mr. Swedroe says that he favors short-term treasuries and long-term inflation-protected bonds over gold as he thinks they are much better hedge than gold is. We can agree only to the point that they can work better temporarily. Gold has thousands of years of history as money and US treasuries are not even close to matching that kind of record. Sure, in the last several decades gold's price fluctuated wildly, but was it ever worthless? No. It always rebounded eventually. Paper currencies? State treasury notes? There were cases when they became worthless in the modern history. Plus, let's keep in mind that inflation-protected securities are protected according to the official inflation rate. If the latter is understated (and it likely is), then these securities will provide protection only to some degree.
Please note that at 1:38 Mr. Swedroe says that if the Fed doesn't tighten the monetary policy, gold could go to $2,500 or $5,000. So, basically...
The following part of the Market Alert includes detailed price targets for gold and silver prices and precise trading plan for the coming days.
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Premium Update
May 3, 2013, 6:51 AMThe fall in the price of gold has triggered a new run on physical gold. There seems to be a growing disconnect between paper and real gold. The strength in the physical market suggests that the bull market is intact and that what we’re seeing now is just a major correction within the secular bull market. It doesn't prove that precious metals can’t move lower temporarily.
Let's see what we can tell from the charts:
- The US Dollar Index has confirmed a breakout above the very long-term resistance line - are precious metals doomed?
- The Euro Index bottomed within our target area and then moved higher
- The expected rally in the long-term S&P 500 is underway
- Key support and resistance lines provide important signs for gold
- Comparison of the 2008 and the current decline - similarities particularly visible in case of silver
- Silver to gold ratio - implications for the precious metals sector
- Target levels for the current decline in gold, silver and mining stocks
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Market Alert
May 2, 2013, 5:07 AMThe opening paragraphs of today's Market Alert:
Yesterday's decline in gold was quite significant on one hand (biggest decline in 2 weeks), but on the other, it didn't take gold much lower. From the non-USD perspective, however, gold is now once again below its 38.2% retracement level (after having briefly moved above the 50% retracement), which is an indication that the pullback might be over and that gold is ready to decline once again.
Moreover, the decline that we saw yesterday took place on volume that was higher than what we had seen in the previous 2 days when gold moved higher and the implications are bearish as in this case volume confirms the move down, not the move up. Silver erased much of last week's gains yesterday alone, so the bearish signal here is much more profound than what we see in the gold market.
Mining stocks didn't decline much yesterday, but we have noticed an interesting pattern in the recent weeks - that miner's reaction can be delayed by a day or two. In any case, miners (GDX ETF in this case) declined yesterday on volume that was much higher than the volume that had accompanied daily rallies earlier this week. Again, a bearish sign.
The most interesting thing, however, in our view is something related to what we described yesterday. The recent intra-day link between gold and USD.
The following part of the alert includes detailed price targets for gold and silver prices and precise trading plan for the coming days.
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