Sunday, 10 June 2007

The HUI Signal (Half_Monty)

I've been following Half Monty for around four years over at the Gold Eagle Forum. He is not always right but he has ever been articulate and astute in the comments and judgements that he has made over that time. This post which he made this morning is worthy of posting in full - because if he is right, gold and gold shares will be truly on their way up.

"We goldbugs are at a distinct advantage this weekend as we try to guess the follow-through to last week's market volatility.

We know something that no mainstream commentator has noticed -- something that not one investor in a hundred has paid any attention to.

We know that the index of unhedged gold stocks reversed to the upside on Friday, even as the price of gold tumbled $14 to new spring lows.

So this morning, as we assess the future of bonds, stocks and commodities, we do so with a certain foreknowledge:

1) We know that precious metal stocks are about to launch a sustained rise.

2) We know that the next major move of gold and silver will be to the upside.

Since our investment interest is in PMs, we needn't translate this known action to a general market forecast, but we might reasonably do so.

We might recall that PMs have risen both in the context of falling interest rates (2001-2003) and rising interest rates (2003-2006). But, throughout, the PM bull market has had a common theme -- CB (Central Banks) accommodation. In 2001-2003, this took the form of plummeting interest rates; in 2003-2006 it took the form of lagging, baby-step rate increases and direct bolstering of monetary aggregates.

The coming PM launch tells us that renewed CB accommodation lies directly ahead. Given the current level of interest rates, the accommodation will likely take the form of lower interest rates -- absolutely lower on the short end and relatively lower on the long end, measured as real return after inflation.

Another thanks to goldmich5 for making this conclusion not only compelling but (to quote L. P. Berra) necessary."


No comments:

About Me

I teach Film, Media and English Lit.