Gold's Message
Peter Brimelow
March 3, 2011, 2:21 a.m. EST
What is gold telling us?
Commentary: Gold’s gains may have meaning beyond the market
By Peter Brimelow, MarketWatch
NEW YORK (MarketWatch) — Gold reaches a record high. Is it telling us something?
Gold closed $1437.70 on Wednesday, using the CME April contract as themeasure, up $28.40 so far this week and breaking through significanttechnical barriers.
Over the weekend, Australia’s The Privateer had growled: “Just as it hassince early November 2010, the area between $1,400 and $1,425 isproving a firm ‘ceiling’ for gold.”
The Gartman Letter was more direct on Tuesday: “Someone … or something …has kept a virtual lid on the gold market at or near $1,414-$1,416 forthe past many months and has certainly been at work for the past twoweeks making certain that gold does not push upward through that level.”
Consequently the new, adjusted gold chart looks very exciting. PringResearch put out an early Weekly Infomovie Report on Wednesday morning,saying of the (for practical purposes identical to gold) SPDR Gold TrustETF/quotes/comstock/13*!gld/quotes/nls/gld(GLD139.35,+1.26,+0.91%) chart: “The break-out is likely to be a valid one. That’simportant because these consolidation formations are typically followedby price moves far in excess of that suggested by their size.”
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The Aden Forecast’s Wednesday evening Weekly Update has swung entirelypositive: “Now that gold is hitting new highs, it’s still to be seen ifthis is really the start of an A rise or an extended C rise. In eithercase, it’s very bullish.”
(Last week the Aden Forecast was still entertaining the possibility that gold remained in the undesirable “D” decline phase.)
Can gold go further? MarketVane’s Bullish Consensus appears to say yes.On Wednesday gold rose to a 2011 high of 80% but the previous night aLeMetropoleCafe correspondent pointed out that, prior to the 2008 crash,tops generally involved several days in the 90s. Mark Hulbert’s HGNSIappeared to support this optimism. (See Mark Hulbert’s March 2 column.— but after Wednesday’s action, HGNSI jumped very dramatically, to71.9% vs. a record high of 89.58%, which will certainly disturbcontrarians.)
What is going on? Obviously, the Middle East and the oil squeeze have tobe considered. But two (hopefully) longer-term factors also commandattention.
News of a recent stunning acceleration in Chinese imports is spreading. (See Feb. 7 column.)This week UBS published a report saying China imported 200 metrictonnes of gold in the first two months of this year, which suggests anastonishing and bullish restructuring of the physical market.
Possibly more important are signs of a dramatic slump in confidence inU.S. economic management. Symptomatic of this is the normallysomewhat-deferential Gartman Letter.
Discussing Fed Chairman Bernanke’s Tuesday Congressional testimonyDennis Gartman complained of “what we consider to have been one of theworst performances by an American central banker before a congressionaldelegation that we can remember … but then again we’ve only a memorygoing back to the days of William McChesney Martin, so our pool fromwhich to draw is limited.”
“The Fed Chairman seemed all too willing to write off the current globalprice increases of food and energy as simply the result of exogenousmarket circumstances. … We have heretofore been overt and veryconsistent defenders of the Fed and of Dr. Bernanke … but the Fedchairman’s denigration of the problems attendant to rising food andenergy yesterday caught us off guard, as it apparently caught everyoneelse off guard also. It was within a few minutes of his discussion thatgold prices soared. They should have. They responded properly and theyresponded well.”
It’s not just Middle Eastern turmoil that is alarmingly reminiscent of the late 1970s!