The story of the day is that gold dropped 6%, ending below the $1,600 mark. The Dow Jones Industrial Average also lost ground, ending at 11,828, and firmly on its way back to the midpoint and fair value (11,245.) The 15-51 Indicator also moved lower, losing 1% of its value.
Listen, it’s a sloppy market. The primary cause of world protests and revolutions (inflation) is starting to threaten market activity. Widespread incompetency of world central governance provides no assurance to traders — who, on a day-to-day basis, have no clue how to value investments. This confusion creates daily volatility and speculation. That’s how oil and gold can price correct along with stocks.
A long term perspective, however, can always be counted on to provide a sober assessment. Below is an updated five year chart.
Gold started its magnificent run at the first signs of troubles during the “financial crisis.” Notice, however, that it didn’t run a straight line. It goes up and then it goes down, and then it does it again. After each price correction gold ends higher because central governors continue to weaken world currencies. Gold is a currency hedge that is also used to back trade (and currencies) during poor economic conditions. Today’s drop in price is nothing less than a short-term price correction created by traders that can’t figure out where the best bet is.
That’s why stocks also corrected today. This is to be expected, of course, as there’s still speculation about recession, the direction of unemployment, and how to rivive the disastrous housing market and comatose banking system. Sloppy stock market volatility has no choice but to exist. It’s really the same old story.
Maintain focus and sharpen your plan.
Let me know if you need help.