Gold Down For Now But Just Wait

Gold Down on Bearish Charts, Outside Markets

Some European market watchers say the Greece matter and the “end-game” could become clearer by the end of this week. However, the market place has heard that kind of talk literally for years, and the problems with European sovereign debt continue to surface. While the gold market has gotten little to no lift from this latest EU debt crisis, it’s my bias that the safe-haven metal will benefit in the coming months or even years from the EU debt crisis and the potential for another worldwide financial market contagion.

A feature in the market place Monday was the sharp sell-off in the crude oil market, in which prices hit a three-month low. Prices are now bearing down on the $50-a-barrel mark, which seems likely to be hit in the not-too-distant future. The steep downturn in the crude oil market recently is a bearish omen for the rest of the raw commodity sector. It will be difficult for a raw commodity market to sustain a price uptrend when its leader, crude oil, is in a steep downtrend.

The Greece debt crisis has overshadowed important economic developments in China recently. China’s stock market is now down nearly 30% in just three weeks’ time, with the Chinese government trying to stem the tide of selling pressure. China economic data released in recent weeks has been mostly downbeat. Keep a close eye on China news in the coming weeks. It’s likely that upcoming economic developments in China will have more worldwide markets significance than will developments in Greece. Copper prices plunged Monday on China economic worries. China is the world’s largest raw commodity importer. China’s economic worries have already spilled over into Australia, as the Australian dollar has plunged to a six-year low versus the U.S. dollar this week.

My view:

No matter how much spin is put on the economic data by big media and government officials, the problems that the 2008 financial crisis revealed have not magically disappeared.

Many banks are still far too large and "to big to fail".

Many businesses and individuals carry far to much debt.

Banks still operate a highly leveraged fractional reserve system of lending.

Banks still buy copious amounts of government debt.

Governments still overspend and sell massive amounts of bonds to the banks.

Governments now need extremely low interest rates to continue ad infinitum.

Fiat currencies remain the great dominant force in the market place as investors have confidence in them despite their dubious track record of value retention.

Gold remains patient, waiting to be discovered as the true store of value.

It is my view that we will see greatly increased volatility come into the market in the next few weeks. Once this occurs, perhaps due to a trigger event, gold will finally emerge from its nearly 4 year long bear market.