Is Now the Time to Buy Gold?

Gold almost took off past the $1,000 dollar range and is now currently at $879. This last week's soft CPI & PPI reports shows that we are currently in a deflationary period and that inflation will not be a concern in the near term. However with that said, Copper, Zinc and even Nickel are starting to move up …actually rapidly. Just Gold and Silver are in a down trend ( depending on your time frame).

The fact is Gold looks cheap. The next fact is that we all know inflation will eventually be a problem. The million dollar question is when will inflation kick in? In trading or investing, timing is everything. Gold is something different. Country after country is trying to devalue their currencies. Gold is real…so should we start buying gold?

Actually comparing 60 commodities..Gold and silver are the weakest on a relative strength basis. So my answer is now is not the time to buy gold. The technical momentum is not positive for gold prices right now. If gold takes out the 200 day moving average there could be an increase in selling pressure. In the short term, it doesn’t look like inflation will be a problem, so Gold won’t move up on that.

Don’t get me wrong, being a trader (Commodity Trading Adviser) we need to trend-follow, not predict. It is not easy to have purchased US dollars last fall when everyone was so against the Dollar. Personally I think Gold prices are eventually headed much higher, but it's hard with the stock market showing strength and deflation rearing its ugly head for me to buy Gold right now.

This is the whole concept of Trend following: Have no opinion, Buy Strength…Sell Weakness.

Comments

[capt Brian:]

Oh, geez, did he get paid to say that. I dunno, but I will, again, put in my two cents.
When should you buy something? When it is up, or when it is expected to go up? (was that a hard question)... Did you get a feeling that silver and gold (and platinum and paladium) were going up with you missing it AGAIN a little while ago?
Now that some gyrations in politics, media hype, and stock rallies, have soured you on the Precious Metals (PM's)
Have we repaired our global economy? Are people in need of money [cash]? Could someone be selling PM's to make ends meet around the world? [even governments who need cash] Could this soften the price of PM's for a bit as these 'storehouses of value' come out in bad times, [which is why folks put it away in the 1st place, to be used in bad times]... or am I missing something? I think the supply and demand curve is working perfectly. I don't think anyone is manipulating prices of the PM's but are "working it". And that is called the free market. It is working fine. So, I am buying into weakness. Got any to sell me? I prefer platinum in here...

Apr 19 09:55 AM

[notsosmart:]

there is no inflation as long as jobs are being lost.who will raise their price? homes,cars,clothing? even food stabilizes although they may catch you on weights & measures.

Apr 19 10:41 AM

[Mad Hedge F...:]

I would wait for a pullback. “There is room for bulls and bears, but pigs get slaughtered,” said Peter Munk, the legendary founder and CEO of Barrick Gold, the world’s largest gold producer. This is his admonition to worshipers of the barbaric relic hoping for a quick super spike to $2,000 or $5,000 an ounce. Since 2003 gold has tripled from $300 to $1,000, outperforming every asset class in every currency, and he has no problem with it backing and filling here in a long term uptrend. The fundamentals look great, as the world is running out of the yellow metal. The industry used to be run by demand from the Indian wedding season. The current economic stress has made the country a net exporter of gold for the first time. Global jewelry demand is at a 20 year low. With the help of satellites, the world is pretty well mapped out, so there will be no more surprise Californias or Klondikes found. The only untapped reserves are in the Andes at 13,000 feet, or in countries too dangerous to visit. The cost of extraction has also doubled in ten years to $400/ounce, driven by labor, fuel, trucks, and environmental mitigation. Gold will only go down when the US government turns off its printing presses. With record stimulus packages in place, there is a fat chance of that happening in this lifetime. Ultimately, the price of gold is a barometer of fear, which will not be in short supply in the new era we are facing.

Apr 19 11:23 AM

[fireball:]

looks like a nice buying opportunity is on the way.
in these days i will welcome a chance to increase my "insured" savings.

Apr 19 12:06 PM

[FDNY RET:]

I'm with you Brian: He's got it backwards, I'm buying now--at 850 and below. Then selling at 900 and above. I'm not a day trader and have the patience to wait for my future sell points.

It's stood me well in the past and I don't see the stampeding herd coming to their senses anytime soon.

When inflation starts to bite--then the real fun will start!.

Apr 19 03:35 PM

[doubleguns:]

So, you are saying gold could pull back from here and presently has no opportunity to go up right now.

The point of owning gold is to keep your portfolio from total collapse. Something we have come really close to recently. Its still fresh on my mind, maybe not your. We may soon revisit that event. I know all it would take is the "right" natural disaster or some "man made disaster" as the administration puts it, and we would be off to the races. We still could see the collapse because congress still doesn't get it, wont get it, cant get it, I do know if they fell over it that they would get it.

The potential race would be stocks twords zero and gold to the moon. That is the most important reason to own gold. Once you own some then if you want, you can trade some but always, and I mean always own enough to keep from going bankrupt if you wake up and an event like 9/11 or dollar collapse occures. For that just in case event is when everyone around you is trying to buy it in a panic. THAT would be the worst time to buy. Right nows not so bad, next month might be better but if you KNEW that we would all be subscribers to your newsletter.

Apr 19 10:28 PM

[E Nuff Sed:]

Inflation is not coming for a long time.

Destruction of private demand short of a major war is not easy to fill.

Look at Japan. 20+ years of massive deficit spending and interest rates are close to zero.

Apr 19 10:44 PM

[nova:]

E Nuff Sed wrote:

> Inflation is not coming for a long time.
Look at Japan. 20+ years of massive deficit spending and interest
rates are close to zero.<

But Japan did/does not have to borrow from outside. It use their own "hard labor" and savings. The USA has no such luxury.

Apr 20 12:18 AM

[user 385544:]

I have a problem with the reasoning to buying and holding gold. We made it down to 6500 on the DOW and true demand wasn't there. Its good for jewelry and catalytic converters when platinum is in short supply. We really don't know how much the IMF has and they are dumping tons anyway? China seems to be more interested in copper, nickle, and stockpiling other commodities. Downside risk is much more than the upside at this particular time. Gold doesn't seem to be the haven or bellwether it once was. At the very least there are other hard assets to invest in with stability and upside potential.

Also, last time i checked gold wasn't very tasty; only time ive had it was in a shot of Goldshlager. If things get as bad as some of us doomsayers think (myself included), I think i would rather own something i can eat or drink.

If you really want to own gold own physical gold, but not (GLD). The paper market seems a little suspect. I say that with respect to WHY you would want to own gold, supposed the security of your portfolio and hedge inflation. (GLD) seems to be a traders and speculators game...or shall i say manipulators game. At that point your aren't really interested in "gold", your just trading or speculating on any other stock or ETF.

Apr 20 02:45 AM