Don't understand today what is happening to gold trade. Yellen is basically a copy of Bernie and will play the QE card well into 2014. She has said she will continue to ease (print money) as along as unemployment is high and the economy is unstable. Now that logic is good for Gold because it leaves a weak U.S. dollar and basically says - things are not right with our economy. Gold should be up today and some would think up BIG.
But it appears the nomination of Yellen is causing a gold sell off. WHY Also Congress and the President are no where near coming to an agreement on govt shutdown and debt limit crisis. So those on the board that are (wiser) them me please explain why gold is down when it should be moving higher.
IMO gold is down today precisely because it "should" be up on the Janet Yellen news. The short termers who expected an immediate move up on her nomination, were disappointed and apparently felt that "nothing will move it up" now. So they sold. This happened right after the government shut-down was announced last week - no immediate move up in gold, so a move down instead. But the next day it moved back up. Eventually, monetary fundamentals will matter and be good for gold. Just a matter of "when" and by "how much". IMO gold reaches $2,500-4,000/oz between now and the end of 2016; meantime who knows.
Mostly because gold is just a shiny metal with no real role in world affairs anymore. It simply is disconnected from money supply. It simply is not connected to government policy. It is a shiny precious metal that is rare. It has a mraket value and nothing else. Currently, the market value is falling.
Your premise that the implications of Yellen's monetary policies has a relation to gold is what is incorrect. There is no reason why gold should be moving higher with looser monetary policy. It should move higher when demand is higher or supply is lower. Demand is falling.
Yeah, I ask the same questions and share the same confounding angst. Gold is doing the opposite of "what it should" in this environment; My take, gold is in a bear market, and bear markets are hard to break. Plus, you have everyone believing that "goldilocks" is just around the corner once Congress comes to an agreement, the debt ceiling is raised, and Washington is "back to work". Many are trading ahead of this "inevitability", looking for 5% quick pops on stocks that have been drug-down b/c of this big government impasse. Thus, people aren't buying the fear here, and gold is under pressure. Until something structurally is proven to be broken with our economy, such as a US-default, or super-duper high interest rates as a result of QE, gold is in its downtrend, and it will probably hit Goldman's $1050 target.
One needs to have long-dated views with gold, imo and prepare for a $1,000 breach in the meantime. Long-term, I don't see how the USA squeaks by un-loading the Fed's $3-trillion in assets acquired, and doing so without big inflation. In the meantime, don't be disappointed, b/c there's more pain to come with gold. I do think it will find its footing from $900-$1000 and I also believe we'll have big structural challenges to face once the effects of QE are really felt!
All imo, glty, and gltua!
PS: I'm in pain with some long-dated gold options...When looking at the historical chart for gold, iIcould see $900-$1,000 easy, but I also thought that this government shut-down, debt-ceiling fiasco, and our current problems (QE curtailment being delayed, rising 10-year...etc, etc, et al), would potentially keep gold tracking toward $1,500 and I didn't want to miss that opportunity as I saw it. Now seeing how gold has traded, from the day after its big bump when the Fed make their most recent announcement (seeing how gold retreated more and faster, almost, than it went-up Fed-speak-day, should have been tell-tale that God is being SOLD and short too!
I am not wiser, just give you my two cents.
1) The investment community seems to have found the solution to all economic problems which is money printing without inflation which will cause "economic growth" and increase corporate profits. This is a scenario in which gold will go down.
2) Somewhat contradicting point 1) the real fear of the market is deflation, not inflation, so they are selling gold which is seen as doing better in inflationary times.
My conclusion: the vicious bear market in gold continues. However what nobody is seeing is that we are close to a bottom. Why? Because the cost on mining gold is $1100-1200 and going up and when gold reaches that level miners will stop mining. Furthermore the chinese, indians and idiots like me will continue buying it. And when reality will set in that point #1 is a fallacy gold will skyrocket.
I totally agree with you ferdinandoc,
Nice thoughts and points. That's the "big fallacy" that people/money-managers/Goldmans' of the world are confusing, i.e. rising corporate profits and stock prices, NOT PURELY ON THEIR OWN MERIT, but largely induced by Fed-action. The Fed can't prop-it-up forever. The Fed-think-action is that they can "prop it up long enough that the Market will be strong enough to stand on its own", but that can only happen with a strong consumer, expanding jobs and people working, paying bills, doing business and becoming more wealthy. Yes, we have improved since the depths of the recession, but I'm not convinced that if the Fed started to pull-out now, we wouldn't fall-back into another recession fast. Yet, I have seen some improvement. Housing has bounced-back fairly good where I live, from the lows, although largely investor driven...it does account for improvement. I'm seeing more building....Really, it's a mixed-bag. I'm not a total doomsayer....it's one heck of a balancing act the Fed is engaged, b/c the stock-Market never got to right itself on its own merit, just the hot-gas injected by the Fed. When the Fed does ease-off, you'll definitely see the hot-air go-out of the Market, but the question is and will be, "are the fundamental economic and market conditions markedly improved to withstand a Fed partial pull-out, without the seems bursting asunder"? That's the big question, and it my mind, it's a very mixed bag. $47-million Americans are on Food Stamps...that's a lot, and that tells us something either about the "state of our economy" or the "social policies of our Fed. Gov. and our indebtedness to demanding programs", but most likely both!
Well I'm sure missing the boat on which way gold is supposed to move now. A few weeks back when everyone thought the Fed would taper, I went short gold and lost that battle. Thought for sure the Fed in October would start to ease off the print money gas pedal. The Fed didn't and gold jumped. Now with Yellen for the next two, three, four years or what ever and knowing she loves to QE, gold should be way up. Throw in the uncertainty in Washington D.C. that will continue this week and next and gold should be flying higher. Seems to me everything is switched right now and gold is trading opposite the way it should.