Factors are favorable for gold
By Daniel at 25 August, 2008, 8:39 am
Can you consider a 20% price drop in gold a sign of a bear market? All historic data would disagree with this analysis. I think Wall Street Stock pickers have to come in terms with the idea that a secular commodity bull market started in around 2001.
1. If this is the end of this bull market, this would be about 40% shorter than the usual secular commodity bull market.
2. People who trade commodities on a regular basis understand the risks of high voletility in this market. 25% corrections are very healthy retracements in these markets. Like in the case of gold, in the 70s gold retaced at least 4 times at least 25% (at one point 48%) before it reached its peak.
The best way not to lose sight in tradind commodities (especially for gold) is to look at the current fundaments.
All the following factors are favorable for gold:
1. Financial crisis with no end in sight
2. low interest rates around the world
3. 12.68% inflation in the US if calculated the way it was caluclated before the clinton years
4. result - high negative real interest rate in many countries
5. Having Bernanke as the Fed Chair who is Fearful of experiencing a potential depression
6. M3 (although there as some contraction lately) sitll at about 15%
7. US huge debt which will increase due to major Governmental bailouts which will be very inflationary for the US dollar. (and don’t get fooled if the US dollar starts to depreciate less against other currencies, the Euro for example experiences similar problems which does not mean that gold should not appreciate against many inflated world currencies.
Bottom line, as long as there is not only speculative talk about attempting to conrol inflation like actually sharply raising interest rates like at the beginning of the 80s, but real action, I have to continue being a gold/commodity bull.
Did you like this? Please If so, please bookmark it,InvestmentWatch relies on the financial support of its readers.
Your endorsement is greatly appreciated!
Possibly Related Posts:
- Forbes Article: “JPM is the Best Bank”
- US Treasuries and all paper money
- China mid June steel output hits 2009 high -CISA
- LEGG MASON’S BILL MILLER: BANK OF AMERICA(BAC) IS SUPERUNDERVALUED ECHOING MANY OTHERS
- WSJ: BAC HAS A VERY LUCRATIVE 2Q THANKS TO STRONG TRADING, UNDERWRITING, MERRILL, COUNTRYWIDE
Did you like this? If so, please bookmark it,
No comments yet.