The Golden Path

Posted 11 months, 7 days ago.

The Gold market during the past seven months has truly been incredible. Flash back to mid-September 2007 and you will find Gold trading in the $680.00 range, while six months later in mid-March ‘08 it was trading $1,030.
The Gold rally had been fueled, in part, by the apparently never-ending stream of reports of the Mortgage/Credit Sector fiasco, higher energy prices, poor jobless claims, and generally higher commodity prices nearly across the board. The U.S Dollar has been getting crushed over the past seven months despite efforts from the FOMC to stabilize the economy, which perhaps may work itself into supporting the US Dollar.

If you like to trade volatile and choppy markets the Gold market is your dream come true. It has certainly become a true World market with the insertion of an ever growing middle class in China, India, and the Middle East. The gold market has been deemed a “safe haven” for investors during uncertain economic times. The rally over the past seven months argues that it may be more practical to purchase more Gold to further diversify a portfolio than to sell profitable Gold and metal positions to defend positions in other market sectors such as an equity portfolio.

During the past month the Gold has sold off. In my opinion, much of this selling pressure has been due to an overbought market, lack of new buying momentum, and of course -profit taking. But in my opinion nothing has really changed. High energy prices persist, in fact Crude oil is trading at all time high levels. There is still a severe problem in the Mortgage, Housing, and Credit sectors. So why is Crude oil trading at all time highs while gold is trading under $900.00? Since they are both “anti Dollar” they should be running together!

In my opinion the FOMC is selling Gold to inject cash to support the Dollar, and I still feel the U.S Dollar is being supported on a very weak foundation. The past seven months have been incredible and in my opinion the Gold rally is more than justified.

Mike Daly

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