On Monday, I sent my Red-Hot Global Resources subscribers my presentation from the Vancouver Resource Investment Conference, in which I make a bullish case for gold. We saw the forces I talked about kick into action on Wednesday. On Thursday, I sent my subscribers an issue with links to interviews I did at the conference, as well as write-ups on a bunch of stocks — along with a warning that we were due for a pullback. Well, we got that, too.
So what’s next? Read on.
The market is disappointed this morning by The advance GDP estimate, which came in at an annual rate of 2.8% in the fourth quarter. That was below consensus estimate of 3.2%. The real concern for the market is that the bulk of the increase stemmed from the change in private inventories, whichcontributed 1.94 percentage points to the fourth quarter change in real GDP. Real final sales, which exclude the change in inventories, rose just 0.8% after a 3.2% increase in the third quarter. So, companies took on more inventory, but weren’t able to sell it.
Also, NOMINAL GDP grew well below forecasts. The price deflator was up just .4% compared to an estimate of 1.9%, Nominal GDP rose 3.2% vs the estimate of 4.9%. Personal Consumption was up 2.0% against the forecast of 2.4%. Fixed Investment rose 3.3% helped by a 5.2% increase in equipment and software spending and residential construction rose by 10.9%.
It’s a pretty mixed bag. You can see why the Federal Reserve, on Wednesday, promised nearly-free money from here to eternity (or at least until 2014).
The Fed’s promise of easy money was the final straw for the U.S. dollar, which was already sputtering. It went into a dive …
You can see that long with breaking its recent uptrend, the U.S. dollar index fell below its 50-day moving average. Today, it’s trying to find support at the 38% Fibonacci retracment of its recent rally. Good luck with that. Note the rising volume on the sell-off. But the dollar’s attempt at a bounce, combined with the fact that stocks were overbought and need a breather, means we may be coming up on a buying opportunity in stocks, particularly gold and silver miners.
But what if we don’t get the pullback in gold miners? Let’s look at a daily chart of the Market Vectors Gold Miners ETF (GDX: 57.00 +1.24 +2.22%) …
You can see that the GDX is powering higher on high volume. Sure, it gapped higher, and we’d expect that gap to be filled. But it doesn’t mean it has to be filled soon … or even this year. The next pullback may be at higher levels.
Now, let’s look at a chart of gold …
You can see that gold broke its downtrend. What’s more, it has done this on higher volume than we’ve seen in some time. for support, it sure looks like we have a double-bottom in place. This looks very bullish to me.
So, is a correction a false hope at these prices? .
One more chart. This one is from James Bianco (on Barry Ritholtz’s website), showing how the European Central Bank’s balance sheet is exploding higher.
But it’s not just the ECB. Mr. Bianco says that ALL central bank balance sheets are exploding higher. And he has the charts to back it up.
If that’s the case — would you rather own paper money, or hard currency?
That’s what we have to ponder going in to the weekend
Good luck and good trades.
