In spite of the fact that the global stock sell off (Crash) is dragging gold down up to hundreds of dollars (from its peaks near 1900 US) gold should hold better than any commodities, even oil.
Silver is seeing some leverage spill out, and so is Gold. But in big stock crashes gold gets dragged down as funds had profits in the gold sector, and after markets settle down (when will the crashing stop?) gold should still be well over $1000 by that time. Gold had established a good base right at $1000 well before this stock rally started in 2009 with the QE and that market rally in March - about 2009.
That QE rally lasted about a year and a half, and that rally is what is being taken apart as another big round of QE from the Fed looks less likely to emerge.
The 'operation twist' to push out the maturity of US Treasuries the Fed tried had a reverse effect of hurting the nervous markets. Gold got dragged down as did silver, but silver is still highly leveraged in principle and has further to correct than gold. But both metals still have a goodly amount to drop if these world stock crashes are only getting started.
We alerted subscribers last weekend that gold and especially copper and resources were well over bought given the global slowdown -last Saturday. We also stated we expected the USD to hold 77 on the USDX which it did admirably.
Uh oh, not a trade war!
I was especially surprised about noises from Brazil talking about big new tariffs on Chinese imports. And the EU is finding China less interested in bailing out the EU bank mess unless China gets more access to the EU markets. Talk about a sore spot in global trade, the Chinese want more market access or at least no tariffs, and it seems everyone is panicky now.
IF a trade war starts we are in for a long downward stock spiral. After all, trade wars were what emerged after the Great Depression turned worse well after the initial stock crashes started in 1929 to around 1931-32. And that was a US election year period as well.
Errie similarities to the Gread Depression
There are so many similarities with the developing world economic depression and that fateful period in 1929 and then the bank crisis around 1931 (actually bank closures and collapses that spread around the world in the several years after the first stock crashes in the late 1929 period). The parallels are striking and even with our advanced economies and electronic banking and electronic money, all the same problems are reemerging and even the timing appears to be intact too, first a stock crash worldwide followed by several years of stock turmoil but a relief rally, then - get this ultimately the US Dow crashed all the way down to minus 90 PCT.
That is a scary thought. I would have thought electronic money would speed up that relief rally and next crash, but apparently there are biological reasons (generational forces) for the multiyear crashes in a huge world stock crash, and so we may be in for a terrible year of market turmoil starting now and into Fall 2012.
We stated that either the world would get a bad stock crash now or by surely first quarter 2012. Well it appears it's the early scenario and we are right in the middle of it.
Unfortunately, things are panning out to match a decade long Kondratieff crash which started about 1990 by my estimates, mainly built on the tech revolution with personal computers and then the internet, followed by massive credit in real estate and a massive real estate crash still underway. China figures massively in an unfolding real estate crash, which is only beginning there.
The rest of the West is ahead in their real estate crash, but still has further to go downward, but we are nearer the bottom of our real estate crashes than say China or other - sorry to say this guys - but other emerging nations and the economies tied closely to the emerging economies like Brazil, and China and India - which means resource currencies like the AUD and the CAD and others are in for some downward pressures that will not abate for at least a year, as leverage starts coming out of resources which were a strategy based on the Brics (Brazil, China, India etc.).
But the looming trade wars with huge friction now emerging with China vs. the EU and Brazil is not encouraging at all.
We warned subscribers last Sunday evening to get ready for a rough week. And what a week it has been. New huge developments at every hour practically, IE things are worsening so fast it makes one head spin. I have a headache already, and it looks like another marathon market sell down with new huge economic and geo political developments each day making everybody breathless.
Don't get burnt out
The last time I felt this way (already burnt out some) was during the fall 2008. I guess we better get ready to pace ourselves in this one. Get some sleep guys, trust me....
Who can say if staying on the sidelines is the best strategy, but the rally in the USD and gold's sell off due to leverage and also just margin calls may continue for months. We called a USD bottom at exactly 77 this last Sunday for subscribers...
Now we will have to watch closely if the Yen starts unwinding more carry trade and rising like a skyrocket.
But in any case our subscribers were well warned in advance of all this turmoil, and they even got good tradable warnings - and yes this week has been something else. I don't have any complaints tho- so something must have worked for our readers...I sure don't envy those media TV people who must be burning the candle at three ends - how they carry that pace is beyond me. I get tired just trying to keep up with them on TV.
One good strategy is not to watch television constantly - lower the bandwidth of information (less TV for example) and check in periodically. Remember to watch your health here...this might be a long rough period of months to the end of 2011...
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