Nov 23 2008
Has Gold Gotten its Groove Back?
Friday I released a note saying that I thought that gold probably had found its legs in the mid 730 range. This morning I looked at the numbers and it went up $55 in one day. Good going, Gold!
There are some important reasons this is all happening now. Most people who have fled out of the market and into American dollars or Treasuries are now realising that the US is completely standing on a foundation of sand. The debt on our nation’s books is almost mindboggling: $10 trillion acccording to National Public Radio on Friday. Add on to that the debt that millions of Americans now have on their credit card and suddenly our nation looks like a bunch of irresponsible teenagers.
Saudia Arabia, according to Mile Larson of Weiss Management Group, has been buying gold like crazy, and Larry Edelson of Real Money Report, indicates that the Chinese government, too, has been buying. The Chinese people buy strands of gold and wear it in necklaces, that’s how much the common person chooses to interact with the yellow metal.
While I think it is possible that the gold will move back up, and strongly, I can’t look at the one year chart of gold and feel good about the direction it is going to take. In fact, it looks more like it is in a downward trend than an upward trend. And although all economic indicators point that gold will climb, I don’t know if this rally is temporary.
Let’s talk for a second about those economic indicators. First, the unemployment number sin the US have risen in the past month. Consumers have tightened there wallets and as a result, the demand for oil has dropped, hence the price has, too. One would think that there is nothing but gloom and doom on the horizon.
The problem is that local economies don’t bear out. This area of the Midwest, for example, still has work, still needs people to fill positions. Truck driving firms are still looking for drivers, factories are still looking for people to fill the midshift timeslot, farmers say they still can’t get good hired help. What has left are the better paying jobs, not all jobs. Underemployment threatens the US more than lack of employment.
Gold responds to doom and gloom, and some of the perception provided by the media is that there is no hope for a better tomorrow. The reports of job layoffs never take into account the number of positions that are still available. And that is a heartening thought in a time of increasing unemployment.
