Jan

10

Gold: The Dreaded Yellow Metal Enters the Enthusiasm Phase

By Teresa | Filed Under Trading Ideas | Start a Discussion 

You might not know this, but I spent the first half of my career trading gold and gold-miners. What I learned is that the yellow metal is diabolical. It’s very difficult to trade. Psychology factors big time and the gaps are killer. It’s the ultimate beauty contestant.

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If memory serves correctly, gold bottomed in 1996 or 1997 in the mid-200s. Since January 2007, the metal is up 40% while high flying stocks such as FCX are up 88%. (Side note: FCX has been lagging the metal for several months. Perhaps that is a message.)

If this sort of price action were to be seen in the Dow Industrials or the S&P 500 index, the move would certainly be labelled a bubble, a prelude to disaster. But the permabear priesthood never sees it like this for gold. No, “gold is the new currency”, “the return of sound money” or “the new world order”. Furthermore, there is always a conspiracy amongst the central banks against the little guy. Gold is the ultimate Robin Hood trade.

Well, you can imagine what goes through my mind when I see all the hoopla in the news: this must be the enthusiasm phase of the sentiment cycle. Let’s keep in mind that gold is a commodity, a speculative vehicle.

At the moment, Gartman is the only one telling it like it is. The public is being told that gold is the place to be:

  • Gold at record high near $900 on rate cut hopes
    [Editor: Goldbugs inbue the yellow metal with magical powers; it can go up in any circumstance, namely inflation, deflation, stagflation or political uncertainty. All the bases covered.] Gold extended gains on Friday and hit a record high near $900 an ounce, driven by speculative buying after comments by the Federal Reserve Chairman Ben Bernanke sparked speculation of further rate cuts.
  • ETFs Stoke Investors’ Gold Fever
    The most-active gold ETF — called streetTracks Gold Shares, trading under the ticker GLD — now averages about eight million shares a day in turnover, more even than Google Inc.’s shares, which change hands less than seven million times a day on average. GLD’s underlying holdings of the precious metal are greater than the European Central Bank’s or China’s central bank. emand from investors is driving the price of gold higher, even though demand for the metal for things like jewelry is surprisingly soft.
  • Gold Continues to Shine
    Gold hit another record high Thursday, but will the demand and momentum for the safe haven-asset continue? James Burton, CEO of World Gold Council, has more analysis.
  • Investing in Commodities
    Discussing whether commodities are still a bright spot for investors, with Victor Sperandeo, Alpha Financial Technologies; James Bianco, Bianco Research; and CNBC’s Dylan Ratigan
  • Jim Rogers Favors Agricultural Commodities, Sells Dollar
    Jim Rogers, chairman of Rogers Holdings, talks with Bloomberg’s Mark Barton from Singapore about the risk of recession in the U.S., the outlook for commodities and currencies, and his investment strategy. Rogers said he has sold the dollar and British pound as global currencies “come under stress.”
  • Faber Says U.S. Stocks May Rally in Next Three Months
    Marc Faber, managing director of Marc Faber Ltd. and publisher of the Gloom, Boom & Doom Report, talks with Bloomberg’s Carol Massar in New York about the U.S. economy, stocks, the dollar and his investment advice. Bloomberg’s Julie Hyman and Erik Schatzker also speak.

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