Tuesday, September 9, 2014

Gold Musings and the Patience of Job

I have to admit, I have been rather quiet the last few days. Aside from attending to my day job and more importantly family events, the real elephant in the room where it pertains to the investment universe has been the gold sell off. And to be honest, I really did not know how to comment in regards to what one should do. On one hand, I remain bullish long-term on the yellow metal and the precious metal equities. However on the other hand, and yes I am putting on an economists hat here, many of the precious metal equities have busted their May/June support levels, which could indicate further downside. The break in some of the equities has occurred in conjunction with the price of gold piercing the $1,265 support level. With many of those technical levels taken out, I have been debating holding the line on some of gains for year in the hopes of jumping back in later at better prices. To frame my thinking, the long gold trade has been hit from many sides in the last few weeks. Lets review some of these occurrences.

- The geopolitical environment has come off the boil with the Ukrainian cease fire accord with Russia

- QE is apparently coming to a close in the US, which has coincided with chatter from both the Fed and the investment community about an increase in interest rates sooner rather than later.

- The take-down in US QE, coincidentally right, has come with an indication that Draghi will now push the ECB in to a European style QE.

The latter two has pushed the price of the dollar higher, as the Euro price in the currency markets have plunged. just look at the charts.....

The dollar has gone nearly parabolic.

And inversely, the Euro has plunged.

This trading dynamic has put pressure on the price of gold and correspondingly the precious metal equities. Surprisingly though, the price of gold has held up well despite the parabolic moves in the currency trades. this is while the precious metal equities have remained stronger, technically, than the metals. Bottom line, I am unsure of a recommend course. I think we are sitting at a critical juncture in the precious metal space and prices could move in either direction. Although I have been accused of having the patience of Job, to a fault, I also understand doing nothing is sometimes the best course of action.

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