Waiting for the gold market to react to current conditions is like watching a boy blow up a balloon to see how big he can make it. Sooner or later the pressure has to overcome the resistance. Posted by James Randolph on March 25, 2011
Pressure is building to get the gold market back on track.
March 25, 2011 – Waiting for the gold market to react to current conditions is like watching a boy blow up a balloon to see how big he can make it. Sooner or later the pressure has to overcome the resistance.
Throughout the recession and Bernanke’s insane attempts to stimulate the economy gold has proven its reputation as safe haven, but interest remains curiously low. As a result gold has become significantly undervalued. As the spread between current gold prices and the long-term trend widens, the pressure builds to get back on track.
Wall Street and the Fed, of course, are doing all they can to prevent that. “Stocks are in a rally,” they say, “so who needs safe haven?” Well for one thing, the rally is a ruse. Volumes are light, indicating “a lack of any desire to sell, not … any compelling reason to buy,” says market strategist Marc Pado in Market Watch. But what about all the good news from the manufacturing sector?
“The Federal Reserve this month reported that factory output grew for an eighth consecutive month in February, and the Institute for Supply Management’s measure of manufacturing activity reached its highest level since 2004,” says the Wall Street Journal’s Justin Lahart. Having trudged our way back to where we were seven years ago, considering the growth in population and expected growth in the economy is hardly something to brag about.
Far more telling is the just released durable goods report, which shows capital investment, and purchases of factory machinery in particular, is still in decline. That is an indisputable sign that production is still well below capacity and confidence in economic growth is low. Thus expectations for GDP growth has fallen to new lows, now resting between 2% and 2.5%.
Things are getting worse, not better. Pressure is building in the gold market so get in now before she blows.
Senior Staff Writer – Certified Gold Exchange