On the heels of the Dow surging nearly 250 points, today one of the greats in the business sent King World News a fantastic piece about today’s wild trading action and what he’s watching in the gold market.
By Bill Fleckenstein President Of Fleckenstein Capital
November 18 (King World News) – Overnight markets were on the slightly weaker side, but that didn’t stop our stock market from bolting out of the gate and gaining 0.75% to 1% by the time the FOMC minutes hit in the early afternoon. There was no particular reason to cause the spike higher that I could see, but that has been the case for the last few days and the market has just done what it has done…
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Perhaps the catalyst for the Nasdaq was the roughly 2.5% move early on by Apple after Goldman Sachs tried to make the case that the company should be revalued as a “service company.”
QCOM Plays the Skunk at the AAPL Garden Party
In any case, that put a smiley face on most things in technology, with the notable exception of Qualcomm, which was hammered for 10% due to an inquiry on the part of Korea into its business practices.
In the last couple of hours the indices kept climbing (as the Fed said nothing) and by day’s end they had gained 1.75% or so. Away from stocks, green paper was flattish, as was oil, fixed income was slightly lower, and the metals were a tiny bit lower for most of the day, as they continue to grind to the downside in an unprecedented display of lopsided trading action (today marks the twentieth day out of twenty-two that spot gold has declined).
Red Rut
I don’t even know how to comment on that, as I have rarely seen anything move in one direction that relentlessly. I know when I am looking at potential shorts and I see something that has been on a long run to the upside it often leads to a decent reversal, but thus far lopsidedness in the metals has only led to more of the same, though the miners have been behaving slightly better (especially today).
Whether the miners are going to catch up on the downside or they are indicating that gold is done declining, I can’t say for sure. I’d like to believe it is the latter, but I’m not confident enough that is the case to do too much about it, though I did buy some calls, just in case. I’d prefer to see gold do something — anything — constructive before adding to my exposure, no matter how eager I am to act.
Included below are four questions and answers from today’s Q&A with Bill Fleckenstein. The questions are from his subscribers and they get to read Fleckenstein’s answers every day.
Bonus Q&A
Question: Bill, What in your view is behind the sharp selloff in PM? It really can’t get a bid! Despite gold positive events. And it’s selling big in Asia. How can the COMEX any longer set the price? It seems insane. I have physical but I sure would not sell it at these depressed prices.
Answer from Fleck: “I have no idea why it has been so relentless, nor does anyone else that I know of.”
Question: Bill, what would have to happen to change your bullish theory on Gold for the long term, price drops below 1,000? the economy reaccelerates?
Answer from Fleck: “The price of gold doesn’t tell you whether you need it or not, it is the policies being pursued that dictate what you need to do.”
Question: Dear Bill, congratulations on your terrific site. I am a recent subscriber and love reading your thoughts on markets etc. I track the gold price closely and have watched with interest movements over the last few weeks. Manipulation by investment bank cronies comes to mind – why can’t something be done about this blatant rort? Thanks
Answer from Fleck: “Thanks, but unfortunately no one in the regulatory structure really cares about gold.”
Question: We could not have been more wrong about gold, today included, but clearly the “dollar” is strong and that must be the cause of all the PM carnage. Yet you have said that a strong dollar does not necessarily have to mean low PM prices. Do you foresee some change ahead where people realize how possibly “undervalued” PM are? Thanks. This has not been an easy time for rational people!
Answer from Fleck: “Of course I do, I just can’t tell you exactly what it will be or when. The psychology in metals is sort of like the inverse of the current mania with regard to stocks.”
***To subscribe to Bill Fleckenstein’s fascinating Daily Thoughts CLICK HERE.
***ALSO JUST RELEASED: Some Commodity Prices Now Trading At Levels Last Seen In 2009 CLICK HERE.
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