Gold will go up while commodities go down May 21, 2006 I have been warning that volatility will increase since last year, but because most of the volatility we have seen thus far has been to the upside, it was ignored. Well, there is still more volatility ahead. Metals prices have risen too fast and although unpredictable with respect to timing, a correction was inevitable. The increase in metals prices over the past several months may have been nothing more than momentum buying and short covering, which means we could see a bounce in the near future. However, this week's decline in metals prices could also signal the end of the bull market in commodities. I have written extensively about the fragile US economy and about how a slowdown in US economic growth will reverberate around the world -- leading to reduced demand for base metals (among other things) and hence a decline in base metals prices. The rise in base metals prices during the past six months may well have been the speculative blow-off that often occurs at the top of a market. That does not mean base metals prices are going straight down; the market seldom goes straight up or straight down. But in my opinion, the bull market in commodities is either over, or very close to being over. Take note of the fact that equities markets across the globe have been getting hammered. Equities markets are typically forward looking and if they are turning down it could spell trouble ahead for the world's economic growth. Renewed interest in metals from investors who have no comprehension of the difference between metal commodities and gold -- which is money, and not a commodity -- has contributed to the rise in the gold price during the past six months. The bad news is that the gold price is being dragged down by other commodity prices. The good news is that it is presenting a buying opportunity in the gold sector that I fully intend to avail myself to in the coming weeks. At some point the correlation between base metals prices and the gold price should break down, after which gold should rise while base metals decline. Paul van Eeden Disclaimer This letter/article is not intended to meet your specific individual investment needs and it is not tailored to your personal financial situation. Nothing contained herein constitutes, is intended, or deemed to be -- either implied or otherwise -- investment advice. This letter/article reflects the personal views and opinions of Paul van Eeden and that is all it purports to be. While the information herein is believed to be accurate and reliable it is not guaranteed or implied to be so. The information herein may not be complete or correct; it is provided in good faith but without any legal responsibility or obligation to provide future updates. Neither Paul van Eeden, nor anyone else, accepts any responsibility, or assumes any liability, whatsoever, for any direct, indirect or consequential loss arising from the use of the information in this letter/article. The information contained herein is subject to change without notice, may become outdated and will not be updated. Paul van Eeden, entities that he controls, family, friends, employees, associates, and others may have positions in securities mentioned, or discussed, in this letter/article. While every attempt is made to avoid conflicts of interest, such conflicts do arise from time to time. Whenever a conflict of interest arises, every attempt is made to resolve such conflict in the best possible interest of all parties, but you should not assume that your interest would be placed ahead of anyone else’s interest in the event of a conflict of interest. No part of this letter/article may be reproduced, copied, emailed, faxed, or distributed (in any form) without the express written permission of Paul van Eeden. Everything contained herein is subject to international copyright protection. |
|
|
