Gold is trading down sharply today. My guess is that we're seeing more long liquidation. There's a large contingent of speculative longs in the market, as indicated in the most recent Commitment of Traders Report from the CFTC.
While that speculative net long position has come down from the highs of July 5, it needs to come down further, in my opinion, before the market can resume its bullish trend. If the longs are liquidating today, as I imagine they are, then that's a good thing for gold.
Gold's bull trend is not over. I say this as someone who is, admittedly, not a fan of gold. However, I'm also a trader, so if I see an opportunity I will take advantage of it. Gold's rise is being driven by rising fiscal stimulus, i.e., rising deficit spending, not just here in the U.S. but also in all the major industrial countries.
Gold's bull trend is not over. I say this as someone who is, admittedly, not a fan of gold. However, I'm also a trader, so if I see an opportunity I will take advantage of it. Gold's rise is being driven by rising fiscal stimulus, i.e., rising deficit spending, not just here in the U.S. but also in all the major industrial countries.
It will get a further boost from another Fed rate hike when that happens. That's how the current rally began. It got going when the Fed hiked rates last December -- the first rate increase in nine years -- and gold went from $1,080 an ounce to over $1,300 an ounce.
As I have explained, rate hikes equate to price increases. Raise the cost of credit and that trickles through to all other prices in the economy. In addition, since the government is a net payer of interest, higher rates necessarily increase government spending (all else being equal). So rate hikes are inflationary. Central bankers may think they're putting the brakes on inflation when they raise interest rates, but they're not. They end up doing just the opposite.
Personally, I am happy the weak longs and zombies are getting flushed out of gold right now. This will go far in discounting the next Fed rate hike and stemming the selling that's likely to occur when that happens.
When I look at gold and stocks, it makes me think back to that "big idea" trade of George Soros and Stanley Druckenmiller. Remember that one? "Sell stocks and buy gold?" Back in May, early June? I called both of them out on that trade. I mocked them because they're supposedly savvy investors. What a joke. Their "rationale," if you want to call it that, was based on all the same misguided theories of the many financial quacks we see all over the media all the time. Utter nonsense.
No wonder Soros' fund is down on the year. And you know what's even funnier? Supposedly he is selling out of his gold position, exactly when he should be doubling up. Instead he's doubling up on his short S&P position. Wow. That's all I can say. Just, wow.
I'm a buyer of gold down here. The trend has not changed. It's just fooling a lot of people, but that's what markets do; they fool people. (Or, people are fools?) It's possible that we may see one more brief dip down when the Fed raises rates, but then it's off on another leg of the current bull market.
As I have explained, rate hikes equate to price increases. Raise the cost of credit and that trickles through to all other prices in the economy. In addition, since the government is a net payer of interest, higher rates necessarily increase government spending (all else being equal). So rate hikes are inflationary. Central bankers may think they're putting the brakes on inflation when they raise interest rates, but they're not. They end up doing just the opposite.
Personally, I am happy the weak longs and zombies are getting flushed out of gold right now. This will go far in discounting the next Fed rate hike and stemming the selling that's likely to occur when that happens.
When I look at gold and stocks, it makes me think back to that "big idea" trade of George Soros and Stanley Druckenmiller. Remember that one? "Sell stocks and buy gold?" Back in May, early June? I called both of them out on that trade. I mocked them because they're supposedly savvy investors. What a joke. Their "rationale," if you want to call it that, was based on all the same misguided theories of the many financial quacks we see all over the media all the time. Utter nonsense.
No wonder Soros' fund is down on the year. And you know what's even funnier? Supposedly he is selling out of his gold position, exactly when he should be doubling up. Instead he's doubling up on his short S&P position. Wow. That's all I can say. Just, wow.
I'm a buyer of gold down here. The trend has not changed. It's just fooling a lot of people, but that's what markets do; they fool people. (Or, people are fools?) It's possible that we may see one more brief dip down when the Fed raises rates, but then it's off on another leg of the current bull market.
That will take gold to a new trading range of somewhere between $1,400 and $1,500. Soros will probably be getting back in at $1,500, saying higher rates are going to cause a stock market crash, so he wants to be in gold. Of course, that will be wrong, too.
You see how hard it is to trade when you don't understand now the monetary system functions? With Modern Monetary Theory, I don't have that problem. Without MMT, you need rigged trades, insider information or just be lucky when you guess.
If you're interested in catching the next leg up in gold, take a look at the October gold futures contract down here below $1,330, or VanEck Vectors Gold Miners ETF (GDX)(in the $27 price "handle") or SPDR Gold Shares (GLD) (in the $125 price "handle"). Should be good.
By: Mike Norman (Real Money).
Photo: Financial Express.
Review: Emerging Market Formulations & Research Unit, FLAGSHIP RECORDS.
For The #FacebookTeam
You see how hard it is to trade when you don't understand now the monetary system functions? With Modern Monetary Theory, I don't have that problem. Without MMT, you need rigged trades, insider information or just be lucky when you guess.
If you're interested in catching the next leg up in gold, take a look at the October gold futures contract down here below $1,330, or VanEck Vectors Gold Miners ETF (GDX)(in the $27 price "handle") or SPDR Gold Shares (GLD) (in the $125 price "handle"). Should be good.
By: Mike Norman (Real Money).
Photo: Financial Express.
Review: Emerging Market Formulations & Research Unit, FLAGSHIP RECORDS.
For The #FacebookTeam