At 8:30 AM est. the "preliminary" US 2nd quarter GDP number will be released. THIS NUMBER IS BIG. Economic catastrophe or reprieve? A lot of faces will be turning blue in anticipation of the release. +3.2% is the consensus estimate. I won't be holding my breath...
On June 27th, 2007, The Truth Is Out There , I posted the following:
Gold touches 3-month low as investors cut riskWed Jun 27, 2007 6:50AM EDT
If you recently sold your Gold to "avoid risk", I hope you use your proceeds to pay to have your head examined. Yes Gold is a metal...it is NOT a commodity. If you ask me, the "risk" is having your money sitting in cash. Ahhh, the fool and his money...
Gold opened at 642.70 on June 27th, and moved higher for the next 19 days to reach a high of 687.75 before our current pullback. Those silly "risk averse traders"... selling at the bottom on the 26th... for shame.
And now look, today the risk averse appear to be selling yet again:
LONDON, Jul. 25, 2007 (AFX International Focus) -- Gold extended losses into afternoon trade as the dollar firmed and on a rise in global risk aversion after the equity markets dipped overnight, spooking investors out of commodities and into lower-risk assets such as cash and bonds.
Gold must be near another bottom... In conversation with my broker, Steve Thornburry at Monex, this afternoon, I all but predicted a hard bounce in Gold either Friday or Monday. As I type this, Gold is now $6.30 off today's bottom. And the Yen, after a powerful little rally is in retreat. What do the two have in common? It appears they may have quite a bit. I have been studying the yen charts and the Gold charts all week and kept "seeing" a correlation between the two. I alluded to it briefly in yesterdays post. Today I dug in a little deeper and came up with a chart of the Yen vs. Gold. When the chart popped up for the first time I gasped, "Fascinating". There IS an obvious correlation between the two for the past several months.
Please click on the $YEN:$GOLD chart above to enlarge.
It doesn't take a genius to see what this picture may be saying. Gold may be bottoming as I type this. The green arrows point out "significant" recent Bottoms in gold, while the red arrows point out recent "significant" Tops in Gold. The 200 day moving average of the ratio between the Yen and Gold appears to be a signal that a bottom in Gold may be near, or in. Is past performance a guarantee of the same in the future? No, of course not, but until proven otherwise, this bears watching. Note also that in 2006 0.13 was a signal of a top in Gold. In 2007 the ratio seems to have dropped to 0.12 to indicate a top. Fascinating...
The Yen at this hour is retreating from today's high that coincides with it's major downtrend line and a 61% retracement of the Yen most recent slide from it's March high. That March Yen high coincides exactly with Gold's March low. Fascinating...
Gold at this hour is bouncing hard off it's 50 day moving average AND the 50% retracement of the June - July rally. The Yen is retreating from resistance, and Gold is bouncing off support. The Yen/Gold ratio is at it's 200 day moving average. Fascinating...
Observation, conjecture, argument...all could be proven moot by tomorrow's GDP number. But this Yen/Gold ratio is fascinating nonetheless.
Silver bottomed today right on trendline support off the June low, and a 50% retracement of the June - July rally. Silver looks solid, and may be building a Reverse Head & Shoulders bottom here. If this pattern should unfold, we would have a neckline break somewhere between 13.35 and 13.40. A projected move higher out of just such a bottoming pattern would be 14.60/70.
Like I said the other day, "Be prepared to buy the dip."