When a ball is thrown into the air, the speed of that ball decelerates until gravity becomes the more powerful force. Balls, when thrown into the air, do not suddenly rise at a faster rate. Such is the way physics works, and the way markets work. Were this not true, the sky would be filled with balls and the NASDAQ would still be above 5000. $Gold, as wonderful as it is, is not immune to financial gravity. U.S. dollar may be destined for financial oblivion, but we note that the British pound still has value. The acceleration of Gold's rise, as shown in this week's chart, has brought smiles to faces of many and greed to the hearts of others. Again, a parabolic move with accelerating slope in a market is a yellow flag, not a sign of encouragement. What might cause the break in Gold's parabolic rise?
What if buyers of real Gold are on strike? Arabianbusiness.com reported on 9 March that in Abu Dhabi February sales volume of precious metals was off by 20%. Commodity News for Tomorrow, on 4 March, reported that India's imports of Gold in February were 11 tons, down 81% from year ago. India, per the same article, has not imported Silver since October, and may reexport 700 tons plus sell 300 tons of domestic Silver production. Turkey's importation of Gold for jewelry in February was down 30%. Yet the paper Gold market continues to march upward while cash buyers are turning away from Gold due to price. Speculative funds have become the heart of the market on the belief that someone else will provide them a profit. Federal Reserve's expansion of targeted lending to $400 billion might mean that this approach may be preferred to broad interest rate cuts. Market participants, especially dollar bashers, may be disappointed next week by size of any U.S. rate cut. While longer term target for Gold is approaching US$1,500, some skepticism in the short term may be appropriate.
GOLD THOUGHTS come from Ned W. Schmidt,CFA,CEBS, publisher of The Value View Gold Report, monthly, and Trading Thoughts, weekly. To receive copies of recent reports, use this link http://home.att.net/~nwschmidt/Order_Gold_EMonthlyTT.html.