There is a huge rally in the gold price, with the price moving higher despite the lack of any public evidence of a real economic problem or economic slowdown. The market appears to be acting on the psychological aspect that large money investors have convinced themselves that we are at least in recession will be the next recession, so they are buying more gold as a hedge against the downturn.
If you look at the SP500 or the Investor Price Index, they are both down significantly. You can argue it was not really a recession, but it sure looks like it to me.
On the top chart levels, you see all the gold is selling off even though the prices are still relatively high. This makes sense, as the world’s biggest investors, those with a lot of money, are buying up gold.
But, what about the currency? It is down, but no one is talking about that. Those numbers that the Fed is printing out of their butts are not really making the economy stronger.
Instead, the Federal Reserve, the European Central Banks, the Bank of Japan, the Bank of England, and the Bank of Switzerland are printing currency to keep the banks from collapsing or even to keep the markets afloat. Again, if we look at the reality, these foreign central banks do not have a monetary problem.
They are purchasing the paper. They are purchasing the currencies, not actually making them stronger, but just making it seem stronger so they can print paper money.
And then of course the gold price just keeps going up because the rumors are so good for the market. With every bit of positive information, everyone who is not buying gold moves to the trading floor to get in on the rally.
Of course, we are all tired of hearing about the stock market and the banks, and everyone wants to get in on the market. In a way, I feel like the financial market is starting to act on their own.
This is why it is not surprising that we are seeing a break out in this market at this time. Every indicator points to an uptrend in this market, but so many people, especially the self-proclaimed experts, are telling everyone that a new downtrend is coming.
Every indication of the technical indicators, including the uptrend in gold, point to a trend reversal towards the lower end of the market. There will be more volatility in the market, but this will not be good news for gold because it is still a speculative asset.
So, instead of getting into a trading position and not knowing where the price is going, invest on the up move and get out when the market turns down. If you want to get in before the hype of this up trend dies down, make sure you have a good margin of safety with your account.
Do not get in on a down trend, because there is still much uncertainty in this market. Hopefully the sound technical indicators point to a turning point that brings us back to the uptrend.