Gold Wrap: Hold On Loosely?
Despite a bullish outlook, a secondary bottom may be coming for gold.
Does Gold's Lack of Reaction to a Weak Dollar Invalidate Its Bullish Outlook?
Gold fell more than 1% on Tuesday hitting its lowest price in nearly a month. The most concerning part about this decline is that it took place with the dollar's simultaneous plunge. My firm has already touched upon the usual negative correlation between gold and US dollar in the past, and while it is certainly true most of the time, there are periods where precious metals fail to react to the dollar's weakness. There are various hypotheses why this is so this time and one of them is the "fiscal cliff" issue.
Secondary Bottom Coming in Gold Stocks
Here's why January could bring a secondary bottom in the gold stocks. Soon the risk/reward dynamic will be heavily in favor of longs.
After making a textbook double bottom and registering very strong momentum readings, I expected a relatively tame October correction to be followed by another leg higher into year end. I thought the Market Vectors Gold Miners ETF (NYSEARCA:GDX) would bottom at $49. Obviously I was wrong on all counts. It's difficult to make predictions when they are about the future. Kidding aside, forecasts are only a guide or a potential road map. No one can predict the future. However, we can assess risk, reward, and probabilities.
What Bernanke, Marc Faber's Bathroom, and Gold All Have in Common
"I keep in my toilet a picture of Mr. Bernanke. And every time I think about selling my gold, I look at it and I know better!" tweeted Faber.
Marc "Dr. Doom" Faber has never been shy about his opinions concerning the global markets, especially with his Twitter account. As usual, the slight feeling of anonymity with the Internet and social media leads to brutal honesty that people may not necessarily say in a normal conversation. And so is the case with Mr. Faber's Twitter account, as a recent tweet read "I keep in my toilet a picture of Mr. Bernanke. And every time I think about selling my gold, I look at it and I know better!"
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