Get Set for Downward Pressure on Gold

[excerpted from Bill Cara's Daily Report]

Monday, in a bit of fun, I pronounced, “ It shall not be long before the public starts talking of the good old days. So saith I.” In thunderous approval, the crowd roared and the equity market surged almost five percent.

We can all have fun with these things as long as we understand the bigger point is that education and general information is the service I provide, and that I am like you, a student of the market. None of us has all the answers.

I am concerned that many of you will rush headlong into goldminer stocks without watching the huge upward move Monday and again Tuesday morning in the U.S. Dollar and the downward pressure on the Euro. That dynamic is not a positive one for gold and the precious metals, which are already at prices that are riding critical technical support levels.

With this week’s Bank of Canada decision on monetary policy and the same next week for the Fed, what is happening is a run-up in Dollar strength (supported by the Interventionists) before the market weakness that will follow after Canada and the US central bankers drop their rates.

So, if there is going to be downward pressure on the gold and goldminer prices, get set for it.

What will I be recommending afterward, following the rate cuts, is a move back into gold and the goldminers. If the Paulson Reflation Program (already causing other governments to do likewise) and the US government Economic Stimulus Package II, which I believe is on the way (by politicians seeking re-election), is going to work, prices of securities and commodities will continue to rally here.

For this reason, I am a strong supporter of gold and the goldminers, but I am also first and foremost an independent trader. I cannot trade against the market forces except at the moment I execute a trade. The latter point is that, in the very short-term, I sell into strength and buy into weakness.

I hope that’s clear.

Comments

[silverwink:]

"Are we clear"
Perfectly clear.

2008 Oct 22 08:52 AM

[CLH:]

Your paper started out alright but when you said buy gold in a deflation you lost me.

2008 Oct 22 06:59 PM