-- Posted Thursday, 12 March 2009 | Digg This Article
| Source: GoldSeek.com
April Gold: Open= 914.3 High=931.6 Low=907.2 Last= 923.2 +8.9
The price of Gold ended today’s session up almost $9.0 but is trading up $17 in after-hour’s currently. Helping support gold today was a strong rebound in commodity prices, a weakening US dollar, and perhaps a strengthening stock market.
Perhaps is a key word, because while many gold traders fear pending unbridled inflation in the face of Helicopter Ben’s printing press spree, an economic recovery also might mitigate fears of a global financial collapse. Luckily, gold bulls have two arrows in their quivery, so if the global economy does not implode then there still is a real chance at inflation.
Helping fuel the rally in stocks today was a broad commodity rally that saw crude oil prices rise over 8% and gasoline up almost 7%. Higher commodity prices could help many companies recover from the deflationary slump they’ve faced in ’08. Whether consumers can bear the burden of higher prices remains to be answered. Larry Kudlow, of CNBC, said that lower energy prices were a mustard seed for an economic recovery. The cut in prices has allowed consumers to either save more money, pay down debt, or allow for other types of discretionary spending.
Total retail sales dropped by 0.1% in February, beating the forecast of -0.5%. The revised December figure was revised upward from +1.0% to 1.8%, suggesting that perhaps dire forecasts are a tad too grim? Not to say that 8.1% national unemployment is rosy, but that perhaps we could be closer to the end of this than many people ‘feel’. Unemployment is surely to keep rising, and consumer spending could well be flat, and more large lay-offs have been announced. Yet, we’ve also seen four large acquisitions in the pharmaceutical industry in the past two weeks, an announcement by AT&T that they’re looking to fill 3,000 positions, and two of the country’s largest banks announce they’re in the black the first two months of the year.
In what may be a surprise to many, President Obama made a statement today, saying he is a “strong believer in the power of the free market,” and “that jobs are best created not by government but by businesses and entrepreneurs…who are willing to take a risk…” His praise came with a bit of a lure attached to it, as well, saying that he may consider lowering corporate tax rates in exchange for closing many loopholes in the tax structure.
This is a great idea en total. Just like riding legislation of earmarks is, too. But it will take a political fight to get tax loopholes closed, as he will need to take on special interests of Republicans and Democrats. History has shown that lower tax rates do generate more revenue for the government, as seen in the 1920s, 60s, 80s, and 00s. It is not easy or cheap to hide money from the government but individuals and businesses will do it to avoid what they deem is a burdensome tax structure. And many businesses, instead of hiding money overseas, can simply move overseas. He is correct to acknowledge that we must attract more business to the US and make the business climate more welcoming. That does not mean loose regulations, simple efficient and constructive regulations.
What does this all mean? Not sure. The Obama Administration has been all over the political map when it comes to ideas and rhetoric, but actions thus far have been fairly to the left. For gold bugs, an economic recovery could easily return inflation to staggering heights not seen since Carter. The commodity boom in the 2000s was largely fueled by supply/demand fundamentals and aided by a speculative binge. If the deflationary effects of 2008 end up hurting supply channels, then a quick demand recovery coupled by global monetary expansion could create another go-round of price shock.
For now, gold has held the trend-line. From a technical standpoint, prices need to get above the Friday/Monday resistance level around $944. That would break this corrective trend. Those that cannot wait could look to buy mini gold contracts (33.2 oz) but have stops placed just below $890, keeping the market on a short leash.
Review charts on these markets here www.britefutures.com. Remember that futures and options can be used for bullish or bearish positions; feel free to contact me to discuss trading strategies. Each contract/option = 100 ounces, a $1 move in a futures contract = $100.
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Thomas Hartmann
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-- Posted Thursday, 12 March 2009 | Digg This Article | Source: GoldSeek.com
