Those are the well-known lyrics from Let The Good Times Roll: The Music of Luis Jordon – but they could also apply to the gold market today. Larry Edelson would say, “You ain’t.” He calls this gold rally “The Gold Sucker Rally.” He says:
While the metals and mining shares could indeed move higher into early next week, everything I am looking at, including my trading and economic models, are telling me that this rally is nothing more than sucking in the weak-handed buyers and short-covering needed to fuel the next leg down, which should be a doozy.
Indeed, initial projections I just ran show gold now falling as low as $900 as we head into May.
If my work is wrong, then we will still see gold give back as much as two-thirds of this rally — bringing it all the way back down to the $1,250 level or slightly lower — where we will have a chance to enter the long side with much lower risk in our favor. Ditto for mining shares and silver.
I’ll explain more next week. But right now, I repeat, stay OUT of the long side.
–LSE.Co.UK, February 15, 2014
And what do I think of Larry’s analysis? I am on the “you is my baby” side. I think the bottom is already in!
I discussed this with Bill Holter on Friday. Bill has written an article today about two incredibly bullish gold charts and you should read it.
Bill and I do not agree with Larry Edelson’s bearish warning. How can you be when you examine the following two charts and read Holter’s analysis of what they mean?
The long-term charts of both the HUI (mining shares) and Comex gold have turned up off of an extremely oversold position. Collapses do not happen from this level and the reversal, shown on the charts, plus gold’s recent moves above the 50-day, 100-day and 200-day moving average is a strong plus for the continuation of the bull market.
I always like to bounce my views off of my friend Trader David R. He has been very accurate in the past and understands trading the precious metals as well as anyone. He disagrees with Larry Edelson’s analysis but says he hopes Larry is right. He said, “I would love and welcome the opportunity to load up on $900 gold.” He said:
My short-term target was $1,320 and I took profit today. I want to buy a break above $1,430, which would take us to $1,600. I will be honest that I am confused by the action of late, we are seeing all metals including the base metals rally in the face of higher equities….. that makes me nervous about this equity rally…. Gold higher due to short covering, but also debt ceiling raise? Yellen talking about higher inflation targets? Dodd Frank making all consumer and producer hedging costs skyrocket due to higher costs to banks to finance those hedges (and those costs being passed on to consumers)?
What I found interesting was looking at JPY. The JPY is the cheapest currency in the world now, they are factoring in huge inflation on the forward curve and the whole world is short JPY.
My idea today is to short EUR/JPY or Long Nikkei vs. short DAX or even a long JPY vs. short JGB position. This will be my homework this weekend to figure out which of these have the best risk reward, but the JPY is way too cheap here and nobody is long.
On the economic front, everyone is blaming the weather for our poor economic data. Yes it’s partly due to the weather, but the US CONSUMER IS TAPPED OUT ! We saw that with the retail sales numbers from last December. Everyone went nuts building up inventories in the 2nd half of 2013, believing that 2014 was the year we broke out of this economic slump, now the market is long huge amounts of inventories with nobody buying…….. more full time jobs were created in 2012 than 2013 and 72% of all the jobs created last year were part time. This economy cannot function on part time income…… There is a serious debt crisis looming and someone is going to be left holding the bag of a lot of cheap debt (Central Banks = Taxpayers). Short-term deflation and long-term hyperinflation??
I hope he is right, because I would love and welcome the opportunity to load up on $900 gold, but I think he is just talking his book, as we all have a tendency to do!
Edelson’s credibility is on the line here. If he is wrong then all his technical going forward is worthless. If he is right then my hats off to him and I too will back up the truck and buy every ounce I can afford when the price drops…. But I am not holding my breath (and neither is Trader David R).