Gold’s Decade-Long Bull Run is Dead’
…says Gartman. From Forbes entry in the ‘Running of the Goldbugs, 2012’ sweepstakes:
Well close Dennis. But let’s fine tune a little: Unbridled panic-fueled momentum drove gold unsustainably higher as it took a mini blow off and very predictable correction. Gold is not broken in its secular bull market (and not necessarily even the cyclical one out of 2008) by any rational technical parameters. Not as of this writing and thus, not as of your little Forbes piece with the alarmist headline. ‘Irreparable technical damage’ Dennis? Where?
Technical damage could come about but here’s the thing, it has not yet come about. Why the haste to make such a call good sir? And you Forbes; why pile on now when everyone from Buffett to Bernanke himself is mowing down the poor, under-armed gold bugs? If gold is so marginalized, why the big and seemingly coordinated negative ad campaign?
The time to have negative feelings was late last summer. The time to think like a capitalist is now.
Oh my… all the way down to 1550? While that’s a little under my initial support parameter, it does not break the bull market. Next…
What the #$%! are you talking about you egghead? Okay, so you razzle dazzled us with a reference to David Hume. Dial your head out of the clouds and down here to ground zero of the battle between honest systems and corrupt, media perverted ones. David Hume, are you kidding me?
Gold is up over 350% since I became involved in its market. Casino patrons can have thrills on the amusement park rides of 18% and 15.5%.
“The minutes painted a rather more optimistic view on growth, a more convincing take on the basis for the decline in the unemployment rate and most worryingly of all for gold, an acknowledgement by the Fed of the potential for a change in the end-2014 forward guidance.”
“Do not attempt to adjust the picture. We are controlling transmission. If we wish to make it louder, we will bring up the volume. If we wish to make it softer, we will tune it to a whisper. We will control the horizontal. We will control the vertical. We can roll the image, make it flutter. We can change the focus to a soft blur or sharpen it to crystal clarity…”
No QE3 and higher interest rates would cause further damage to gold if the charade on the yield curve can be maintained. Why are long term rates rising when Bernanke has expressly stated that the Fed intends to buy those bonds? For now, short term rates (don’t look behind the ZIRP curtain where Fed Funds money is being given away free of interest) are rising faster than long term rates in all likelihood due to what the Fed has already stated it would do; manipulate the curve by driving up short term rates (selling short term Treasury bonds) relative to long term rates (buying long term bonds).
I am not a perma bear. I was noting economic improvement in February and taking email derision for it to boot. I also noted that the economic growth was caused by inflation. What I did not do was plan for the devil that eventually came out in the details as Dear Leader Bernanke did what no respectable policy maker has done before and decided to just take over the operations of the US Treasury market, which means he had the nerve to single handedly attempt to massage the unmeetable obligations of the US Government in a way that paints a picture of economic growth WITHOUT inflation. So regular market players got Goldilocks and honest money advocates got ignominy.
In fact, higher interest rates are not only possible, but probable. The stress tests assume long-term Treasury note yields stay under 1.8%; but that figure is the current six-month low on the 10-year, which is already dragging along its historical floor. As I write, yields are already up to 2.2%. The post-war average is about 5.2% – high enough to crater today’s banking system.
Well, here we have Peter being Peter. Peter gets a little excited. It comes down to this… if Bernanke is able to continue screwing with the curve, rising rates are likely to hurt gold. If he fails and the market wins out and the yield curve begins to rise again, gold should benefit from rising rates. Short of these scenarios, maybe what is on tap is that the precious metals are forecasting a hard decline across the asset spectrum (with a hard decline in yields, AKA a deflation blip) before gold again leads the way out of it into the next inflationary up cycle. Patience and a noise filter are the best tools now.
Manage risk and understand the game; Forbes, Gartman, Buffett, Roubini, Bernanke… the whole lot of them. This is what happens at the opposite pole to the damaging momentum and greed that drove gold too far last summer and it is all part of doing business in markets that operate as if in Wonderland as opposed to any sort of rational and healthy environment that policy makers and media would have us believe actually exists.