All That is Gold Does Not Glitter
In the wake of gold’s panic inducing $105 sell off, players across the hedge fund universe are reassessing their relationship with the barbarous relic. What started out as a long term commitment is suddenly morphing into a short term fling, or maybe even a one night stand.
The yellow metal is now down 7.6% from its $1,428 peak set only four weeks ago. The technical analysts among you will recognize the chart as screaming a “head and shoulders top”, which bodes ill for short term price movements. It has definitively broken the 50 day moving average at $1,383, and you can bet that many traders spent the weekend gauging their tolerance for additional pain.
Gold is now facing some daunting challenges. High prices have cause scrapping of old jewelry to quadruple, unleashing fresh new supplies on to the market. Have you received a torrent of “come ons” from websites offering to buy your old gold? That’s what I’m talking about. Rising interest rates are also adding some tarnish, as gold yields nothing, and costs money to store and insure. A panoply of new gold related ETF’s have diverted buying away from the physical metal towards paper surrogates.
It is no longer a secret that gold is one of a few places to protect your wealth from the coming surge in inflation that Ben Bernanke’s printing presses assure. So by now, everybody and his brother are in on the trade with a big fat long position. I am a firm believer in the “canoe” theory of investment management. If too many people bunch up on one side of the craft, the whole thing tips over. Finally, gold failed my “cleaning lady” test. When Cecelia started asking me how to buy Mexican gold pesos, I knew it was time to start entertaining short plays.
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AND A FAVORITE Gold Issue (TRE) in a rather precipitous decline breaking $6/shr yesterday, and recovering somewhat today..
AND A FAVORITE Gold Issue (TRE) in a rather precipitous decline breaking $6/shr yesterday, and recovering somewhat today..
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