-- Posted Thursday, 15 November 2007 | Digg This Article
| Source: GoldSeek.com
Thursday Nov 15th, 2007 December Gold : $787.3 -$27.4
The fever pitch about the slump of the dollar, the exaltation of gold, and the global woes about $100+ crude oil struck a chord late last week. That little note sounded a lot like 'cha ching,' as traders banked profits on long gold positions and short dollar trades. The sharp pullback in the equities gave oil traders pause for concern about demand growth and oil prices are decidedly lower, as well. In just five days of trading gold is lowed by $60 and oil by $5. The simple fact is that when prices fly too close to the sun, they get burnt. Just ask Iscariots.
A few eagle eyed commentators noted recently that gangsters in a new rap video are seen flashing stacks of $500 Euros. Its old news that the black market is keen on the physically smaller but monetarily larger $500 Euro notes. What's new is that it hit mainstream about the same time Gisele publicly showed her assets, that is her penchant for being paid in Euros, not dollars.
The dollar has been depreciating for five years now, almost six, and in the same time, gold prices have just about tripled. Obviously, there is a major re-valuation going on in the global market place. Globalization really has been about parity. No longer is the United States the stalwart and hegemon of the world. Economic and military rivals have gained considerable ground over the past 10 years and the change is just more readily apparent today. This is not to say that the US is headed down a deep and terrible hole back to the middle ages. It simply means that the US, while still a major player in the global scene, is not worth the same amount of value as 8 years ago. Just remember that the US stock markets and commodities market are still the most liquid in the world. When trouble brews, when the UN needs money, when equity markets get scared, where does money flow? To the US dollar.
The slide in the dollar seems exhausted. European leaders are beginning to feel the pressure of a strong euro as export business slows with their major largest trading partner, the United States. The cheap dollar actually is fueling a tidy sum of business for domestic exports and keeping the economy moving along, albeit at a slower pace. The European Central Bank decided at their last meeting to hold interest rates steady, after a long series of increases. They're concerned that the euro might simply be too strong.
Gold prices also appear exhausted and could be subject to further sharp liquidation pressure. Buyers will be waiting to re-enter on price weakness however, and weakness indeed is coming. That urge to buy again, however, may not come to fruition till prices tumble lower to the under $750. Any decent sized correction is going to take time to settle out. In May of 2006, gold dropped from $720 to $550 in a matter of weeks. It took over a full year before prices again would break the $720 mark. So if this is a major break in the market and the dollar consolidates, crude heads lower, then bullish exuberance in gold will have to go on pause...for a while. However, the overall trend of gold is still up. Prices will reach $1000 and it could easily be next year. Gold bulls are buying gold for a number of fundamental reasons, including physical demand, slowing physical output from mines, and an increase in the relative perceived worth of gold as a commodity and currency.
This appreciation will not happen all at once and will be subject to extreme price volatility from time to time. Traders need to be nimble and willing to take profits or employ option protection when prices go parabolic and warning signs begin developing. Exiting a rally early is surely better than waiting till five days of liquidation pressure wipe away two weeks of gains (and more to come).
Thank you,
Thomas Hartmann
Altavest Worldwide Trading, Inc.
800 994 9566 x109
949 488 0545 x109
Fax 949 488 7625
tom@altavest.com
www.altavest.com
Risk Disclosure:
The risk of loss in trading commodity futures and options can be substantial. Before trading, you should carefully consider your financial position to determine if futures trading is appropriate. When trading futures and/or options, it is possible to lose the full balance of your account. It is also possible to lose more than your initial deposit when trading futures and/or granting/writing options. As a result, selling/writing "naked" options exposes the seller/writer to the possibility of margin calls and virtually unlimited risk. All funds committed should be purely risk capital. Past performance is no guarantee of future trading results.
-- Posted Thursday, 15 November 2007 | Digg This Article | Source: GoldSeek.com
