4.0 today ?, page-27

A bit of contradictory behaviour.

“U.S. stocks rallied, sending the Standard & Poor’s 500 Index above 1,700 for the first time, after central banks vowed to maintain stimulus and data on global manufacturing beat forecasts.”

If stocks rallied on bets of stimulus for longer then that fundamentally puts upward bias on gold and yet gold got sold of last night back to near support on positive data which is meant to reduce the odds of stimulus for longer! Maybe just a case of some short term traders jumping out of recent gains in gold to chase strong moves in stocks again?

“Central banks throughout the world remain accommodative and you do not want to fight the central banks,” Phil Orlando, New York-based chief equity strategist at Federated Investors, which manages about $380 billion in assets, said by phone. “All of the data from an economic standpoint is telling that the economy is continuing to get better, the labor market is improving, and corporate earnings are coming in better than expected. So this market should continue to work higher.”

“The Fed said yesterday that persistently low inflation could hamper the economy and pledged to keep buying $85 billion in bonds every month. The statement came as data showed the U.S. economy grew more than projected in the second quarter. European Central Bank President Mario Draghi said today that recent economic indicators signal that the euro region is through the worst and reiterated that officials plan to keep interest rates low for the foreseeable future.”

So on the one hand they say don’t fight the fed (it will keep printing) and on the other they tell us to be negative on gold because positive data points to an end to QE.
Contradiction; Either gold will go higher with the stimulus or investors are getting set to be burned from record high markets as QE ending suddenly becomes likely again.
I think QE continues indefinitely and the gold shorts are the ones that will be losing.

One thing is clear; POG can not go much lower for long as it will shut down too many mines and kill supply of physical which is already in short supply (as opposed to paper gold). ABU looks increasingly likely to be a high margin producer with less leverage to moderate swings in gold. That might suggest buying the dips would be a better a better strategy than selling them. For now the POG remains in its up trend and sits just above support. Traders are likely to be nervous, long term investors in ABU should be looking at the bigger picture.

http://www.bloomberg.com/news/2013-08-01/u-s-stock-futures-rise-before-manufacturing-jobs-data.html