As expected gold bounced yesterday after its recent sharp falls. Gold’s lack of correlation with equities (gold has occasional very short term correlation with equities) was seen again as gold and silver were up some 2% while major US indices were down by some 4%.
Citigroup, once the world’s largest bank, fell below $1 per share and General Motors is struggling to avoid bankruptcy. Job numbers in the US today are expected to be poor and this should see gold supported today.
Momentum traders and speculative shorts had the upper hand in recent days but gold is now flat for the week and should gold close higher today and for the week we may see an end to the recent downward trend.
Gold may need a period of consolidation before the primary bull market trend is reasserted and the psychological and technical resistance of $1,000 is overcome.
Gold Less than Half Its Inflation Adjusted High in 1980
Prices look increasingly cheap and bargain hunters and value buyers will be increasingly tempted by gold at these levels.
The shadow banking system with its $700 trillion of derivatives is threatening the solvency of all major US investment banks with JP Morgan’s huge derivative book increasingly coming under the spotlight.
Central banks and governments are now conducting an unprecedented financial and monetary experiment involving quantitative easing which will likely lead to currency devaluations and severe inflation in the coming months.