Posts filed under “Currency”
Back in my days as a trader, I would peruse the lists of 52 week lows looking for reversal candidates. The key was finding an intelligent entry that had a very tight stop, so it presented a good risk reward. I am happy to risk one dollar to make three. Slowly build the position over that line in the sand, so any losses were manageable.
If you are a trader — and I no longer consider myself one — then you have to be wondering when Gold is going to bounce. It has plummeted on little inflation, a strong dollar and an improving economy. When the breathless narrative of hyper-inflation, collapsing fiat currency and end of the world failed to come about, Gold’s spectacular rise ended.
Now, it has free-fallen so far that a counter-trend rally is over due.
How do the typical counter-trend rallies work? Well, the forced selling by margin clerks and futures traders becomes exhausted. A distraction may capture the investing community’s collective attention, allowing some stabilization to occur. As prices stop falling, the fear falling asset holders have been living with dissipates. A little bit of good news, a small reversal in price, and the prior (now discredited) narrative reasserts itself.
Note this scenario is non specific — we see it in stocks, bonds, commodities, real estate and yes, Gold. Apple will run this one day, AIG is already enjoying its turnaround, as all former high flyers do. And if the underlying business model improves, the turnaround could be for real, and the bounce morphs into a new sustainable uptrend.
Here comes the bad news: The bounce in a commodity like Gold — or its primary trading vehicle, GLD — is less likely to achieve that sort of happy ending. The bull market is broken, the prior narrative has utterly failed, and is no longer taken seriously, except by yellow metal jihadists and other assorted suckers.
I was constructive on Gold last decade, but this decade (2011 – ) has not seen the circumstances that are supportive of Gold’s ongoing rise. Despite what some goldbugs have laughably said about me, I am agnostic about the metal, except when it is losing people lots of money. I do detest the narrative driven sales pitch that has caught so many suckers at prices appreciably higher than this.
So what about that bounce?
The charts below show two different ranges where gold can find a footing and rally. That is likely to present your next and perhaps last best exit. Barring some new developments — like all the gold in Fort Knox becoming irradiated — I do not expect to see a resumption of the 2001-11 uptrend.
I don’t have a crystal ball, so I do not make predictions as to where Gold will or will not go. But the weekly and monthly charts lay out two possibly scenarios below.
What Are Gold’s Fundamentals ? (April 15th, 2013)
12 Rules of Goldbuggery (April 16th, 2013)
Sell Out: “The Other Side” (April 22nd, 2013)
Are You an Investor or a Story Teller? (April 25th, 2013)
EVERY Market Is Rigged Bloomberg reports today: Traders at some of the world’s biggest banks manipulated benchmark foreign-exchange rates used to set the value of trillions of dollars of investments, according to five dealers with knowledge of the practice. Employees have been front-running client orders and rigging WM/Reuters rates by pushing through trades before and…Read More
United States $10 Banknote, Legal Tender, Series of 1901 Hat tip boingboing, National Numismatic Collection (NNC) of the Smithsonian Institution Back in the day, US currency did not have Presidents on it, but rather, consisted of “animals and symbolic statuary” as well as landscapes.
Euro: Requiem or Renewal?
David R. Kotok
March 30, 2013
In the last several weeks, a sequence of events involving Cyprus has triggered serious questions about the sustainability of the European Monetary Union (EMU). The events surrounding the finance ministers’ decision to levy taxes (i.e., partially confiscate deposits) on depositors in a Euro-system bank led to a sequence of blunders that have been well-recited in the press. There is no need to repeat the details here.
For readers who missed it, I do want to add this link to the personal observation of Edward Scicluna, finance minister of Malta, who was appointed by his country’s prime minister on March 13. His first action was to participate in the notorious Eurogroup meeting on Cyprus. See: http://www.timesofmalta.com/articles/view/20130319/opinion/cyprus-a-lesson-for-life.462258 . Source: www.timesofmalta.com , March 19.
In the Cyprus affair, we observe a defeat of the concept behind the Eurozone and the original European Union. It took half a century to create the European Union after WWII. The driving force was what the French call a “rapprochement” between formerly antagonistic parties. To put it simply, the Germans and French decided to stop killing each other after a thousand years of war. An economic union seemed the right way to go about attaining peace and prosperity. After centuries of destructive inflation outcomes, they realized credible money was absolutely necessary for this peaceful outcome to succeed.
Charle Hugh Smith is an author. He blogs at Of Two Minds.
If we shed our fixation with the Fed and look at global supply and demand, we get a clearer understanding of the tailwinds driving the U.S. dollar higher.
I know this is as welcome in many circles as a flashbang tossed on the table in a swank dinner party, but the U.S. dollar is going a lot higher over the next few years. For a variety of reasons, many observers expect the dollar to decline against other currencies and gold, the one apples-to-apples measure of a currency’s international purchasing power.
The tailwinds pushing the dollar higher are less intuitively appealing than the reasons given for its coming decline:
1. The Federal Reserve printing another trillion dollars (expanding its balance sheet) will devalue the dollar because money supply is expanding faster than the real economy.
2. The Fed is printing money with the intent of devaluing the dollar to make U.S. exports more competitive globally and thereby boost the domestic economy.
Let’s examine each point.
1A. If much of the Fed’s new money ends up as bank reserves, it is “dead money” and not a factor in the real economy. Fact: money velocity is tanking:
1B. Money is being destroyed by deleveraging and writedowns. This is taking money out of the real economy while the Fed’s new money flows to banks.
1C. The purchasing power of the dollar is set by international supply and demand, not the Fed’s balance sheet or the domestic money supply.