POSITION: Long Gold (GLD)
We bought back our position in Gold (GLD) this morning because:
- PRICE: gold has corrected over -3% from its recent highs.
- CORRELATION: our immediate term TRADE correlation to the US Dollar Index has dropped to -0.10 (benign).
- DURATION: gold remains in what we call a Bullish Formation (bullish across all 3 of our TRADE, TREND and TAIL durations)
Jim Grant, one of the best long-term macro analysts on Wall Street, wrote an outstanding editorial this weekend on Gold in the New York Times titled “How To Make the Dollar Sound Again. Amidst some classic Grant one-liners like, “we could not have printed it, but would have to dig for it”, he called for the extreme bullish view on gold which would entail a return to some form of the Gold Standard that was in place from 1880 to 1914.
While we are very bearish on US fiscal and monetary policy, we aren’t ready to go where Grant went with his editorial, yet. That said, we are willing to subscribe to a model where gold is part of a much more diversified global currency reserve basket. The days of charlatans named Burns, Greenspan, and Bernanke Burning The Buck at the stake for the sake of their ideological beliefs about economic cycles is going by way of the horse and buggy whip.
Gold tested its immediate term TRADE line of support last week ($1360) and has no immediate term TRADE resistance to $1428. The extreme bullish case is very relevant to consider right now. That’s what perpetuates bubbles – the storytelling. And, oh, is this a good one.
Keith R. McCullough
Chief Executive Officer