Welcome to the Vitus Capital Blog!
Notes to myself, possibly of interest to others.
-- Bill Northlich

Sunday, September 25, 2011

What's Gold Doing?

Ritholtz provides the chart below. His take is that gold is merely correcting to the channel it's been in for the last year. Note the yellow 200 day moving average. Does Vitus agree?

Sort of. The usual suspects (Ed Steer, zerohedge) are ablaze with screams of dirty dealing by the "bullon banks", the alleged co-conspirators with the Fed and Treasury, to keep the price of gold in dollars from going through the roof. Vitus does not hold with the conspiracy theory - conspiracies among large groups of people are, let us say, unlikely. Maybe a small bit of fire to that smoke, but not much.

Otoh, despite highly regarded pundits like Rosenberg continuing to favor gold (more recent DR statements on request), there is no guarentee that gold is or will continue to be a favored class.  Gold is a non-economic entity - ie, it does not pay dividends or produce products.  When the economy is doing well, no one cares about gold.  But Vitus does like the argument that gold is a hedge against uncertainty.  In case you haven't noticed, let us be the first to inform you that we continue to be in uncertain mode, economy-wise, and we will be for quite a while.

Vitus thinks "uncertainty" is hard to quantify and shows up only in aggregate measures like the ECRI or - gold. Vitus does not agree with the right-wing pundits who say businesses aren't expanding because of uncertainty. Businesses aren't expanding because they ain't got no customers. Period.

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