Gold Locked In A Trading Range

November 10, 2008 Market Updates, Physical Gold, Politics No Comments

As of this posting 24hr gold is at $746.20 up $12.30. The trading range between $720 and $750 seems to be holding. At one point gold was up to the mid $760s, but was then pushed back down below the $750 mark. The DOW was up strongly at the open based on the China stimulus package (more on that later in this missive), but before long the excitement faded and the DOW rolled over down 151 to 8,791. The NAS was down 39 to 1,608.

Locked Tight In The Trading Range

It appears to me that the gold market is biding time, waiting for a catalyst to trigger the next move. Not having a crystal ball makes it hard to call whether that move is going to be up or down. All signs point towards a deteriorating dollar. At some point in the near future, market sentiment will shift and the dollar will be seen as a liability and it will resume it’s inexorable march towards .72, .62, .52 and beyond. One can only hope that it is an orderly, measured ride down. If it craters, then the ride could get really bumpy. I am not predicting a dollar collapse, merely pointing out that it is a possibility. The powers that be will do everything in their power to avoid a collapse because, unlike conspiracy theorists, I do not believe that a total collapse of the dollar serves the interests of the the movers and the shakers of the global economy. That being said we can examine some aspects of the world economy that will effect gold and the dollar.

Chinas Yaun Gold Locked In A Trading Range

China Joins The Stimulus Bandwagon

China comes out with it’s own $586 billion stimulus package. Unlike the US package which rewards failed companies, paper and management, the Chinese package is designed to stimulate the domestic economy, housing and much needed infrastructure. What a concept, a stimulus package that will actually stimulate the economy!

It is unclear at this time if the Chinese are cranking up the printing presses, like the US, to come up with these funds or are they dipping into their trade surplus wealth to fund this package. This could be a shot in the arm for commodities as China continues to grow and invest in its future. One question remains in my mind. Over what period of time is this money to be spent? Is it one year, 2, 3, a decade? Time will tell, but one thing is for sure, this will effect the base metals complex. On the other hand, AIG getting another 142 billion to cover bad paper will not produce jobs, create wealth or improve the future. The AIG money is simply throwing good money down a rat hole of bad money that hastens the day of reckoning for the dollar.

Physical gold is still impossible to get without long delays on the delivery side. Soon the gold stocks will follow the physicals lead and take off on a rocket shot up.

Till next time, good luck and good trading!