Gold Is A Hedge Against Inflationary Economic Cycles
The point of this post is that the current deflationary credit/mortgage/real estate bust is a major negative for the precious metals sector, just the inflationary real estate/mortgage/credit/easy lending practices boom of 2002 through 2005 was a major positive.
I haven't seen a single gold writer who understands this, just as I haven't seen a single gold writer who understands basic technical analysis, that is, that gold's relatively flat primary multi year Secular Bull Market uptrendline since April 2001 is at $475ish now. Primary trendlines are pretty basic, and, a market or investment is only timely long term (from an investor's point of view) near it's primary trendline.
Gold is a hedge against inflationary economic cycles NOT against inflation per se. Gold's Wave 1 Cyclical Bull Market began at $254ish in April 2001 and ended in May 2006 at $730ish (see chart 2 at http://stockcharts.com/charts/gallery.html?$gold), when a Wave 2 Cyclical Bear Market began, and, coincided closely with the real estate/mortgage/credit/easy lending practices boom of 2002 through 2005, that was fueled by rock bottom interest rates and easy money lending practices, that greatly enhanced real estate affordability, which the Fed helped to fuel with it's own easy money lending practices to banks it lends to.
The refinancing and real estate boom of 2002 through 2005 was obviously very inflationary, because, real estate skyrocketed due to rock bottom interest rates (affordability skyrocketed) and easy money lending prcatices, and, people were able to lower mortgage payments and in many cases take equity out at the same time they were lowering payments or making a purchase. Even when buying a home people were sometimes able to get money back with creative financing.
As a long term multi-year investor in any stock, commodity, etc. you want to buy near the primary multi-year Secular Bull Market/very long term upcycle trendline. Gold's primary multi-year Secular Bull Market/very long term upcycle trendline is at $475ish right now, so, gold would be a great buy in the $475-500 range. When the vast majority of gold writers say it's a great time to buy or are bullish, as they almost always are, it's rarely a good time for long term investors to buy.
HUI/XAU's Wave 2 Cyclical Bear Market began 5-11-06, see charts 7 and 9 at http://www.joefrocks.com/GoldStockCharts.html. The primary Secular Bull Market trendlines since late 2000 are at 200-220 for HUI and at 85-90 for the XAU. Those are the targets for where the Cyclical Bear Market will bottom. NEM's Wave 2 Cyclical Bear Market began on 1-31-06. ....... http://www.JoeFRocks.com/ .
HUI NEM XAU
I haven't seen a single gold writer who understands this, just as I haven't seen a single gold writer who understands basic technical analysis, that is, that gold's relatively flat primary multi year Secular Bull Market uptrendline since April 2001 is at $475ish now. Primary trendlines are pretty basic, and, a market or investment is only timely long term (from an investor's point of view) near it's primary trendline.
Gold is a hedge against inflationary economic cycles NOT against inflation per se. Gold's Wave 1 Cyclical Bull Market began at $254ish in April 2001 and ended in May 2006 at $730ish (see chart 2 at http://stockcharts.com/charts/gallery.html?$gold), when a Wave 2 Cyclical Bear Market began, and, coincided closely with the real estate/mortgage/credit/easy lending practices boom of 2002 through 2005, that was fueled by rock bottom interest rates and easy money lending practices, that greatly enhanced real estate affordability, which the Fed helped to fuel with it's own easy money lending practices to banks it lends to.
The refinancing and real estate boom of 2002 through 2005 was obviously very inflationary, because, real estate skyrocketed due to rock bottom interest rates (affordability skyrocketed) and easy money lending prcatices, and, people were able to lower mortgage payments and in many cases take equity out at the same time they were lowering payments or making a purchase. Even when buying a home people were sometimes able to get money back with creative financing.
As a long term multi-year investor in any stock, commodity, etc. you want to buy near the primary multi-year Secular Bull Market/very long term upcycle trendline. Gold's primary multi-year Secular Bull Market/very long term upcycle trendline is at $475ish right now, so, gold would be a great buy in the $475-500 range. When the vast majority of gold writers say it's a great time to buy or are bullish, as they almost always are, it's rarely a good time for long term investors to buy.
HUI/XAU's Wave 2 Cyclical Bear Market began 5-11-06, see charts 7 and 9 at http://www.joefrocks.com/GoldStockCharts.html. The primary Secular Bull Market trendlines since late 2000 are at 200-220 for HUI and at 85-90 for the XAU. Those are the targets for where the Cyclical Bear Market will bottom. NEM's Wave 2 Cyclical Bear Market began on 1-31-06. ....... http://www.JoeFRocks.com/ .
HUI NEM XAU
posted by Joe Ferrazzano at
2:21 PM
