May 23, 2012 0 Comments Blog by Administrator

I was an early bull on gold when it was particularly unsexy to be so, in the face of every naysayer who knew so well it was dead money, I went wholeheartedly into gold shares. Higher and higher the price of gold rose and seemingly it drew more and more negative comment from people who were supposed to know what value was and how it was represented. Bonds of all sorts paid attractive yields and were far better investments, Euro based governments were selling gold, long stockpiled in their vaults, in order to dress their books to meet their fiscal commitments for entering the Euro. Central banks like the Bank of Canada were selling their long held gold reserves to augment their US dollar needs in the reserve account and yet…and yet…still the price of gold continued its rise. It made no sense, the US had pretty much balanced their books in the Clinton reign, debt needs were falling, the Soviet Union had fractured, the Wall had fallen thanks majorly to a hardnosed Ronald Reagan who spent his opponents into the ground. The world has become a safer place was the thought….or has it? Since those heady days, the US has been attacked on its own soil, the towers fell, people died, reprisals were and continue to be made, security costs have skyrocketed (have you flown anywhere and been left with shoes and socks on lately), the Taliban has been driven from power in Afghanistan, Iraq 1 and 2 and North Korea continues to arm and rattle sabres….and the world is a safer place?
On the financial side of the ledger we have had a US budget so unbalanced as to have astronomical numbers penned about it, Enron, tech boom and bust, bank insolvencies, out of control fund managers, credit defaults, personal unemployment and bankruptcies skyrocketing, Fannie and Ginny Mae bailouts, insurance and auto manufacturing bailouts, global bank rescues and recapitalizations and count em, 2 recessions…and the world is a safer place?
Maybeeeee its like the old adage about the frog being put into boiling water who immediately jumps out of the pot, but that same clever froggy in that same pot having the temperature rise 5 degrees every few minutes won’t jump out, he will just get used to the increasing temperatures, after all its just one thing more and you get used to it and we have boiled frogs legs as a starter. Each and every affront to our sensibilities and knowledge of what makes sense, moves the yardsticks and where once things might have been unusual, now they are commonplace and the yardsticks move again.
Anyone lucky enough to be reading this, be aware, THE GOLD BULL IS JUST RESTING! Yes, the 50 and 200 dma have broken down, essentially on what I deem to be low volume selling. Yes, shares in gold companies remain pressured, essentially on what I deem to be low volume selling. The sell in May crowd is crowing about the calendar and it is time to exit stage left and hit bids. In my view this strategy makes sense for a very short time, historically the traders who make out better through the summer months are the clever people who peck away and take advantage of their purchasing power. As price declines occur dividend yields become more attractive and as is typical of the gold markets, radical contra moves will occur, the smart play I believe is to chip away at a broad based selection of majors and juniors and take advantage of the diminished prices and then just wait. The interesting thing about moving averages is that they move, they reset targets by the minute if you want to get out your microscope and track it in this fashion but the reality is that 5 days below the 50 dma is a 10% shift in the metric and new baselines develop over time passing.  It is not as if Greece will suddenly be cured of its afflictions, they will in fact be the first but not the last to exit the Euro, the lottery becomes what next? Or more to the point, who is next? Ireland? Portugal? Spain? Italy? Or does Germany just get tired of wheeling the financial cripples who had no right to be included in the Euro concept around the Euro ward and say nicht? Do we as such clever people look at Afghanistan and Iraq as filled with solid unarmed citizens who will behave appropriately when the US and NATO forces exit their countries? Or will these places descend into anarchy with the Taliban and various extremist religious factions rising? I know where I would lay my chips! Will the clever dicky at JP Morgan who devised the hedge strategy to offset expected losses which lost the bank $2 billion be promoted and be anointed the sharpest knife in the drawer? I would bet on that too cause it makes sense, does it not?
No dear readers, I will bet that the unfailing lunacy will continue. The need to structure, engineer, micro manage, massage and bafflegab will continue unerringly by what I hope are at the very least well meaninged fools who dwell in the land of patches and fixes, with no thought to look at clouds on the horizons. The gold markets are quite a safe place to be, that you can count on, it is like the proverbial chimp with the hand grenade, I do not know when but I can count on the pin getting pulled and something going boom and the shock will quiet the doom and gloomers and gold will once again rise.
Good luck in your trading and investing strategies, the opinions and views expressed in this blog are inherently my own and while at times lighthearted are an attempt to speak to the realities our world faces.

Gary