Mark McHugh

Squashing Gold Bugs

In Open Thread on Sunday, February 15, 2009 at 6:58 pm

I’m an unapologetic conspiracy theorist.  I believe the people in charge would rather try to manipulating public sentiment(and markets),  than face reality (and justice).  I had reserved judgment on the new administration (which looked a lot like the old administration), until last week.  First we had last Thursday’s (Feb 05)  market likes the idea of abandoning mark to market rally.  Then, we had Tuesday’s Market hates Geithner fade (it was more than sell the news).  This Thursday (feb 12), we had a market likes helping homeowners rally to close the abyss.  Bullshit, Bullshit and more Bullshit. Point is, you are still dealing with a game of Three Card Monte (and not a cop in sight).

So what’s all this got to do with gold?

Everything.  The performance of gold is an embarrassment to Central Banks, Governments and Wall Street.  It confirms the idea that they are idiots, and more and more people are figuring this out.  It’s time once again to shoot the messenger (more accurately, push the messenger off the cliff).  Of course, as long as you can make it look like an accident……

I think gold has gotten a little bit ahead of itself lately and this may make it vulnerable to a very nasty correction.

I posted this chart last week:

Exhibit A:

goldcapture1

Although I did not update it this week, I can tell you the speculative bullish trend remains intact.

Exhibit B  Gold/Oil Ratio (from Stockcharts.com)

goldoilcapture

The ratio is at the highest levels since 1999.  Now, this could mean one of three things: 1) Gold’s too high 2) Oil’s too low, or  3) This ratio is useless.  Peter McKenzie-Brown has a beautiful long term version of Gold/Oil posted here.

Exhibit C:  The dollar’s not exactly collapsing (yet).

1 year chart of PowerShares DB US Dollar Index Bullish (UUP) (yahoo.com)

uupcap

I don’t get the whole currency thing, but this does not look like the chart of something about to implode to me.

Hairbrain theory (not official evidence) If you take the PowerShares DB US Dollar Index Bearish (UDN) and multiply the daily changes by 1.8, you will find the 10-day average tracks the GLD 10-day average fairly close….until recently.  Why 1.8?  No flippin idea (it just seemed to work). Looks like:

wierd

Yeah, I know, but it might help me cop an insanity plea someday. The point is, there is a growing divergence in the weak dollar thesis (yellow).

Exhibit D:

The GLD Chart (from yahoo):  Looks kind-o-toppy to me.

People I don’t trust all seem bullish on gold lately.  Goldman, Morgan Stanley, UBS, Duetsche Bank and Merrill all like gold.  Maybe they are trying to hasten the Darwinian Flush, but somehow I doubt it.  How accurate have Goldman’s oil calls been?  Let’s not forget the G7 meeting this weekend either.  These are the people who need you to believe in thinly sliced trees as money in order to be masters of the universe.  Gold has been laughing at these clowns lately, and they know it.  The US markets are closed Monday (hmmm..).

Add it all up and it could spell an “accident”  for gold in the very near future……




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