Thursday, 3 November 2011

Gold soars, as the European bailout is back on track

Investors were reminded once again today that there are no golden pennies lying on the sidewalk, as gold shed all concerns and manged to pull itself up to the 1763 level. Not very nice for me since I exited all my gold positions at 1755. Silver went pretty much through the same lines as the other precious metals, rising today from $34.02 to $34.50, in what seems to be a rather anemic movement. The main drivers today was ECB's rate cut and (again) turmoil on the Greek political scene as Papandreou succesfully bluffed most of media with his resignation story.

Investment in Gold

Today gold managed to prove once again that it is not a investment, or a precious metal, it is a currency (gaining more and more popularity) that no government can expand freely. It moved pretty far away from its 200d EMA which currently stands at $1612 and from its recent support level at $1687. While a retest is possible, in the mean term I see more strenght and if it takes down the resistance level at $1780, it may well move back to the $1900 levels. I`m looking for another minor dip to scale in, or a move towards the $1770.

What about silver ?

Silver was shuned today, as its correlation with gold was rather weak: It only managed a 0.7% increase, as compared to the 1.44% of gold. In my opinion it is not worth the risk (yet) as I still have in my memory the two recent sell-offs which would have even put Jesse Livermore in the doghouse.

Super Mario starts its ECB mandate with a bang

The European Central Bank surprised the markets today as it announced a 0.25% cut in the benchmark interest rate to 1.25%. Mario Draghi, the Italian chairman of the ECB also expressed concerns as ECB will have to revise down the forecast in the next round of projections which are scheduled in December. It almost makes me say the most dreaded words in the investment sector: "Maybe this time is different". Courtesy of Bloomberg:

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