"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput

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Friday, May 4, 2012

Gold Chart and Comments

Today's payrolls number was just as rotten, if not more so, than most traders and analysts had been expecting. The numbers coming out of the private firms were indicating this and they were very accurate. The problem is that the jobs number was even worse than nearly anyone had anticipated so we did get a very strong reaction in the equity markets with bulls running to the hills sending up smoke signals (this one is for that famous native American running for the Senate in Mass.)  for Mr. Bernanke and company to come and save them. Alas, Mr. Bernanke must have been over sipping some latte at Starbucks as he was no where to be found.

Gold reacted very well to all this partly because the news has traders convinced that this is another notch in the pole adding up to pushing the Fed into another round of bond purchases, aka, QE, and partly because of uncertainty over the upcoming elections in France. How that turns out could impact monetary policy over there.

Also, when one considers the fact that the CCI (Continuous Commodity Index) plummeted lower today with crude oil and gasoline getting whacked, to see gold and silver for that matter, moving higher is encouraging.

It looks to me like they are trying to drive down the price of gasoline to prop up Mr. Obama's pathetic poll numbers. Gasoline futures tend to peak in May anyway but I do find it noteworthy that the entire commodity sector as a whole is pushing relentlessly lower. This gives the doves at the FOMC plenty of ammunition in advocating more stimulus.

The HUI managed to claw its way back above technical chart support at the 420 level as it is bucking the trend of lower equities today. I would feel more confident about a final bottom being forged in these shares if the index could get back above 440, particularly after such a spike lower and sharp rebound as it has so far done today. See yesterday's post as a reminder of just how undervalued these gold shares are in relation to bullion...

More later as time permits...

1 comment:

  1. Dan,

    I think you may have spoken too soon. Yeah gold bounced slightly I would hardly call it "reacting well" and the HUI is in danger of closing red as it is barely above that 420 level as I type this. It looks like it is going to close at the lows of the day which is very bearish considering the levels we are trading at now.


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