Golden Retreat?

By: Randolph Buss | Wed, Apr 30, 2008
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Global Macro Roundtable

<the following is an excerpt from our Blog >

My Mental Market-Box:

Target Price (TP) : Short Term (ST) : Mid Term (MT) : Long Term (LT) :
Support (s) : Resistance (r) : Head Shoulders (h/s) : Double Top (dt) : Reverse (rv) ; Overhead (ov) : Breakout (bo)

My Notes:

For goldbugs these last 18-24 months have been a constant changing of masks - ofter laughing yet also often bawling our hearts out as gold retreats. Yesterday the precious metals took a hit. Nearly -4.5% in gold, silver, HUI, XAU and likewise the GOX and GDM indices. Even the coal index was down 4%. Although it seems counter-intuitive that gold should be correcting this much in the last few weeks against a backdrop of :

But that's exactly what it's doing .... Plunge Protection Team or not ! But stepping back, we see in fact that the overall trend remains clearly upward and within the solid green channel. I still am ardently positive on the Euro versus the US Dollar in remaining strong as the ECB has stated they intend (at this point in time) to curb inflationary tendencies in the Eurozone. This should put a bottom of sorts under the EUR. Likewise, I suspect the FED will try to offset any depressionary economic scenarios by easing credit. Yes, although inflation is the "colour of the day" in the media, the real culprit is a depressionary tendency in the West, and especially the US, hence monetary strategists at Central Banks tend to counteract this by increasing liquidity and easing credit.

The uptrend on the chart shows a possible retracement back down but along the way resistance levels at : 850, 820 and 790. In the overall scheme of gold, this certainly looks like a "normal correction" to accompany the cries of a commodity-hype. MACD is again at a oversold level which existed after the May 2006 correction. Are we ready to embarque on a new leg up?

Remember, any easing of Fed rates takes time to filter through the system and we may see a NICE Autumn rally in the metals... At this point in time I cannot foresee that the Fed will suddenly stop easing for the foreseeable future especially when US housing continues to fall, employment is weak, budget and fiscal debt remains large and the "never-ending" wars based out of Washington. US Dollar Strength ? Anything is possible, but my immediate thought is "Dear, surely you jest!"

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Best regards from the GMR,



Randolph Buss

Author: Randolph Buss

Randolph Buss
Berlin, Germany

Randolph Buss, currently works in portfolio & asset management | commodity fund advisory & management | macro investment research as editor and publisher of his newsletter read in over 45 countries.

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