Fantasies Should Be About Sex
Fantasies are what make our days more tolerable. Buying a lottery ticket is a sure path to thoughts of how to spend the winnings. We know the odds of winning are minimal, but that does not make the fantasy any less enjoyable. Thoughts of winning the lottery probably come in second to our favorite fantasies. Who does not enjoy a good fantasy about sex, whatever your preference might be?
Fantasies should be about sex, not about investments. Last year a Street analyst became a star with his forecast of AAPL at $1,000. From what we see and read, that price target is as likely as winning the lottery. Fantasies about sex do not cost you money. Fantasies, like AAPL at $1,000 and Silver at $100, will cost you money. In short, keep fantasizing on sex not investments.
Above chart is of the year-to-year percentage change in the price of $Gold. It is a rudimentary measure of momentum. Our first observation is that this measure has run between some extreme values in the past five years. The solid black lines capture those extremes. When the momentum rises to or above the upper black line momentum has reached a positive extreme, and may be a flashing red light. The reverse is true when below the bottom black line. That is likely a green light.
However, momentum of $Gold has been difficult to use during this period. The solid blue lines capture what we might call the mini extremes that developed in the middle years on that chart. That period of range bound momentum developed out of the excessive optimism during that period, and the influence of speculative fund traders. Remember the fantasies of $2,000 Gold that were widely spread.
In that chart though is some encouragement that is consistent with our analysis of U.S. monetary policy. In that chart are two periods of extreme negative momentum that persisted for some time. First is in the 2008-9 period. A red arrow has been placed in the chart to measure that time period. In the current time period another arrow has been placed of the same length. Both arrows measure the same length of time.
Current period of negative momentum is approaching the time period of the previous one. Momentum of $Gold could be approaching a period when positive improvement is quite likely. That view is consistent with our analysis of Federal Reserve policy that suggests $Gold turning up in a March-to-May time frame, as we wrote in our January letter.
Investors not living in U.S. dollars are naturally going to have a somewhat difference experience. The Euro is now the darling of forex speculators. That view is a complete reversal of the "Euro will vaporize" fantasy of a not too long ago. Strength in that currency is depressing the price of Gold for those that live in Euros. Those investors may want to take advantage of this Euro strength to add to positions in a gradual manner.
Silver, the momentum of which is plotted in the above chart, has been a fantasy for some time. Clearly the period of negative momentum most recent in that chart is much shorter than the previous period of negative momentum. It simply has not likely finished the full correction process.
Reason for that is the persistent fantasy of $100 Silver that continues to be widespread and that seems to manifest itself if the futures market. Trading Silver futures is clearly the fad trade de jour, and ignores the lack of physical demand and the burden of growing supply that will develop this year. We prefer the Chinese Renminbi to Silver, though it is short-term over bought.
|SELL TARGET||Suspended.||None at this time.|
GOLD THOUGHTS comes from Ned W. Schmidt,CFA as part of a mission to save investors from the regular financial crises created by Keynesianism, and the high priests of that misguided ideology. He is publisher of The Value View Gold Report, monthly, and Trading Thoughts. To receive these reports, go to: www.valueviewgoldreport.com