Thursday, August 14, 2008

Gold's failure

First off I'll repeat that the secular bull market in gold is hardly over.

I'll sell my core position when I see a Dow:gold ratio of close to 1:1 and not until. However it certainly looks like gold has entered a cyclical bear market along with just about every other asset class.

If the gold bull was going to continue this year we probably should not have seen gold trade back below the $850 breakout. Also notice the failure of the recent consolidation. In 07 a similar consolidation led to gold's amazing run over $1000.
Until I see the commercials become extremely bullish on gold I don't want to try and catch this falling knife.

Once this cyclical bear is over though the long term fundamentals will still be in place. Social security, medicare, budget deficits and war expenses. The only way the US can possible hope to pay theses debts is through monetary inflation. Long term tenets #1 & 2 are still valid just on hold for a while