The commodities correction
Frank Hemsley - Wed 31 May, 2006
...Last week, gold broke below $640, which translated into a loss of $80 per ounce since 10 May...Right now, this is looking more like just a correction in gold or in commodities generally. And there could well be more. That means you can be both a gold bull by buying the metal or associated shares... but when you see an opportunity, you can cash in on a short-term pull back...
The commodities correction
May has been both a good and bad month for gold...depending how you look at it.
I mean the real died-in-the-wool fans of the precious metal have probably been jumping with glee at what they will have seen as a great chance to pick up some more gold a little cheaper than they could have done a couple of weeks ago.
But for the tentative semi-believers, then such sharp corrections after such a huge rally since the beginning of April will have been a real test of mettle.
The recent bubble-like highs were followed by sharp plunges of 5%, 6%, and, last week, almost 3%, with the following recoveries not able to even approximate, let alone regain, the ground lost during each preceding retreat.
Last week, gold broke below $640, which translated into a loss of $80 per ounce since 10 May.
The commodities correction: 'Speculative blowout'
Respected economist, Stephen Roach of Morgan Stanley, wrote about the commodities bubble the other day: “Contagion is rapidly spreading into the far corners of commodity markets - including precious metals.
Moreover, signs of psychological excess are building - in an era of globalization, tales of the ‘new era’ are as convincing as ever. Price increases are begetting more price increases - indicative of a speculative blowout that can only end badly.”
Of course, any asset whose price curves indicate the kind of violent mood swings we’ve seen in gold for the past three weeks abound in profit opportunities on the upside and the downside... not necessarily for hoarders and long-term buy-and-hold investors, but for speculative traders who can leverage up and down movements by judiciously spread betting the metals price.
The commodities correction: What next?
Well, gold seems to be stabilising again now after the recent apparent correction. We try not to get too bogged down in any one market dogma. You can make money as the gold price falls and you can also use the correction as a chance to get in to gold stocks a little lower down than a month ago.
Right now, this is looking more like just a correction in gold – or in commodities generally. And there could well be more. That means you can be both a gold bull by buying the metal or associated shares... but when you see an opportunity, you can cash in on a short-term pull back.
You just need to be a little versatile – and a little fickle in your views!
Regards,
Frank Hemsley
for The Daily Reckoning
post a comment
Back to top comments
No comments added
Related Gold Investment Articles
14 May, 2008Taking The Long View On Gold Price
29 Apr, 2008Is the Gold Bull Over?
07 Mar, 2008Theres Still More Bull in Bullion
29 Feb, 2008The Third Stage of Golds bull market
13 Feb, 2008Gold has always held its' value
Most Popular Articles
03 Oct, 2008 An irony-induced Coma: Bailout Bill Historic Vote06 Oct, 2008 Inflation is going away. Prosperity is just around the corner.09 Aug, 2006 Reasons for an impending US economic recession14 Oct, 2004 The current US economy status09 Oct, 2006 What should you do if the real estate bubble bursts?
Recieve Articles like this by email
