go to
https://sites.google.com/site/goldelviroxfashion/gold/gold-9-12-2010
The stock market, particularly the Dow, has been in a very tight
range over the last week. During the last 6 trading sessions, the Dow
has closed between 11,359-11,382. But it won’t be too much longer before
the index is at a new high for the year, as the inflation trade will be
in full effect here pretty soon. Where else are people going to be
putting their money if they start dumping bonds? In cash?
Gold finally was able to stem the 2 day slide that it had endured,
the precious metal closed up $6 to $1,386. I didn’t expect the
correction to last more than a few days, and I think gold will start
working its way higher now. If I’m wrong then it obviously needs to hold
the 50 day.
go to
https://sites.google.com/site/goldelviroxfashion/gold/gold-9-12-2010
The ^HUI had a mild up day as well, closing higher by 5 points to
568. The chart still looks good, as the index remains in the uptrend
that has been in place since the summer.
go to
https://sites.google.com/site/goldelviroxfashion/gold/gold-9-12-2010
I’m not sure why gold investors are worried here about rising bond
yields. They certainly aren’t going up because strong economic growth is
on the immediate horizon. There isn’t going to be a strong recovery
unless housing comes back, and the only way that happens is artificially
through inflation. If yields keep rising it’s because we are about to
have some serious inflation. This isn’t negative for gold, like I have
said before, the Fed can’t raise rates at this time.
This is how I think it all will play out. For starters bonds will
continue to be sold off, as everybody that has been betting on deflation
comes to the realization that they are wrong. Yields will keep rising
over the next 6 months. I don’t think they go crazy though, but they
will be higher than they are today. The stock market will continue to go
up, and gold and silver will be significantly higher. The Fed will not
have taken any steps to try and stop inflation. Actually it will be busy
buying bonds trying its best to suppress yields. The Fed won’t be able
to move on rates until late 2011, and by that time it will be so far
behind the curve that it will take another year of aggressive rate
increases before it can contain inflation. Like I said yesterday, rising
yields are all part of the equation.
