Monday, June 22, 2009
Is Gold Ready for the Down Elevator?
It is 6:08 AM, the coffee is hot and clean cups are on the hook. My sweetheart took the headline picture a few years ago. We were on the north side of Lone Mountain looking down a long dusty road to Devil's Gate. I thought this to be a fitting image to start the week; economic recovery is in view but there's still a long way to get beyond the Devil's Gate.
This could be a tricky week for gold and stocks. The ole Colonel has warned in previous blogs that this summer and fall could have a few speed bumps for both. One catalyst is the outcome the Federal Reserve meeting this week:
"...the Federal Open Market Committee will hold a two-day policy meeting, ending Wednesday with a statement expected to walk the fine line between the need to continue goosing the economy and the need to keep inflation at bay." (WSJ, 6/22/09)
Other influences are the recent cautious to gloomy remarks from the European Central Bank and World Bank:
WASHINGTON -- Developing countries' net private capital inflows fell 41% last year and will be cut nearly in half this year, the World Bank said in a report that offers little hope that the countries will provide the spark for the global economic engine.
Meanwhile, European Central Bank Gov. Jean-Claude Trichet said Sunday that the ECB expects the global economy to moderate its slide over the remainder of the year and resume climbing in 2010.
The World Bank estimated in its annual development-finance review that gross domestic product in developing countries will grow just 1.2% this year, well off the 8.1% pace in 2007 and the 5.9% gain in 2008. (WSJ, 6/22/09)
The London spot market appears to be anticipating something with gold dropping from a $934 open to sub-$920 just several minutes ago. We'll see what happens later this morning but I'm prepared to buy little chunks on the way down and will stick with my prediction that gold will hit $1050 before Christmas. How about a Colonel "tweener" prediction between now and a bump up:
Gold will see $880 before Thanksgiving 2009
I think stocks are looking a little scary too. We've seen a greater than 40% gain in the S&P 500 since the "Devil's Triple Six" low of March 6 (S&P intraday low, 666.79) to an intraday high of 956.3 on June 11th. That's a big bounce for an economic ball that's still losing air. There will no doubt be a rally in stocks late this year when fund managers try to dress up their books, so there should be some buying opportunities for equities in the summer slump. I'll talk about a conservative approach to buying a falling market for us old timer's later this week. How about some more market predictions?
The S&P 500 will see 813 before Christmas 2009
The S&P 500 will break 1000 before New Years 2009
In the meantime, put on your seat belts. We're off to Devil's Gate!
Oil is down $2.16 to $67.86 in early trading (July contract); Gold is down $16.1 to $920.1 (August contract); Silver is down $0.420 at $13.780(July contract); Copper is down 0.0665 to $2.1840(July contract); Molybdenum holds at $10.55.
The DOW is down 129.76 points to 8409.97; the S&P 500, down 17.81 points to 903.42. The miners are down big time:
Barrick (ABX) $32.23 down 5.18%
Newmont (NEM) $40.16 down 4.11%
General Moly (Eureka Moly, LLC) (GMO) $2.47 down 3.52%
Freeport McMoran (FCX) $46.85 down 8.10% (a bellwether mining stock spanning gold, copper & molybdenum)
Steel stocks are down too (a "tell" for General Moly):
Nucor (NUE) $45.00 down 3.60% - domestic steel manufacturing
ArcelorMittal (MT) $31.30 down 6.09% - global steel producer
POSCO (PKX) $79.81 down 4.09%- South Korean integrated steel producer
The Eureka Miner's Grubstake Portfolio is back in the red, down 3.82% to $980,386.08.