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Smart money is selling gold? Bigger Correction of Dow is looming? USD is in death sentence?

First About Gold

According to China Gold Association (CGA)’s data released on 12th August, China consumed 706 tonnes of gold in the first six months of this year, a rise of 54% year over year.  China consumed 832 tonnes of gold in the entire 2012. And on 16th August, Gold rocketed again on Indian rupee weakening, Indian buying ahead of the festive season and U. S. dollar weakening.  So far gold and silver are holding their gains.

Both gold and silver have moved up strongly on the above 2 data. In my analysis, this data should be taken with a grain of salt if you take a short term view. However, this data (especially gold data from China) if added up over the years and into the future, it would be a long lasting ‘stimulant’ to spike up the price to $5000 at least. Meanwhile, do not expect a gold bull run yet unless 1520 is taken out.

Gold has moved up from 1180 $ to $1434, a gain of over 20% in July and August. Does it mean that Gold is now moving back into bull territory and USD is pushed back into the ‘death jail’? My direct answer is that: Time to buy more USD and Time to accumulate more gold on the final dip to new low in the coming months.

The Current State Of Economy

Let’s us explore some recent data which may give us good indication about the state of economy. Currently, there are more outright bulls than bears in the current assessment. In my analysis, most data are giving us very mixed  pictures and are not able to convince me the US and world’s economy are getting better. I still stick to what I said before: the Fed will taper the Q.E before the end of the year but they will revert the tapering programme as soon as they realise that the economy growth is still a ‘Mirage’ and tapering is a premature act.

1.     The American consumer has been the backbone of this recovery.  However, in July consumers were not in a spending mood. Personal spending came at 0.1% vs. consensus of 0.3%.  Personal income came at 0.1% vs. consensus of 0.1%. You should also not to forget that the consumer data for the last few months were pointing in positive direction. This entire means that U.S economy is still very sluggish.

2.     PCE Prices-Core, an important indication of inflation came at 0.1% vs. consensus of 0.2%.  In other words, inflation was below the consensus. You all know that we can never take this data with a pinch of salt.

3.     Personal income only increased 0.1% in July, down from a 0.3% increase in June. This is not helping the consumers to spend. All companies are at priority to cutting costs in order to beat the earning forecast in the current state of economy. You should be happy as long as you can hold your job without being sacked.

4.     Consumer sentiment was revised up to 82.1 in the August University of Michigan Consumer Sentiment Index from 80.0 in the preliminary reading. The upward revision still leaves sentiment below the 85.1 reading in July. I do expect the consumer sentiment (irrational distorted data?) will continue to rise for the next 1-2 years before it finally collapses, when we will see the final big crash in the stock market.

5.     Unemployment (full-employment) is at a multi-decade high as the government has provided little or no incentive for the unemployed to change their ways.

6.     The Chicago PMI increased to 53.0 in August from 51.6 in July. That was exactly what the Briefing.com consensus expected but Production levels weakened slightly as the index fell from 53.6 in July to 53.0 in August. Durable goods

7.     Second quarter GDP was revised up to 2.5% from 1.7%. The Briefing.com consensus expected the reading to be revised to 2.1%. Real final sales were revised up to 1.9% from 1.3%. Just be reminded that the upward revision to GDP growth does not suggest that the underlying problems of weak growth are ending. It was suggested that the whole upward revision came from a stronger-than-originally reported trade deficit, which is likely to reverse in the third quarter.

8.     The weekly MBA Mortgage Index remained in a downtrend with 2.5% fall marking the fourteenth decline out of the past sixteen readings including last week's 4.6% slide. July pending home sales fell 1.3%, which was worse than the 0.2% increase forecast by the Briefing.com consensus. Last week’s reading follows last month's decrease of 0.4%.

9.     July durable orders report was not very encouraging. New orders for primary metals and machinery were both flat while orders for computers and electronic products declined 3.6%. Furthermore, non defence capital goods orders, excluding aircraft -- a proxy for business investment -- fell 3.3% after a 1.3% increase in June.

On the verge of new War Cycle in 2014. Is U.S a new evil empire? What to do with your shares now? Time to unload!

We have entered one of the most dangerous times of the year in terms of market downside volatility. September and early October are used to be bad months for trading and together with Syria’s war concern, we should be alert to the volatility and in term of trading, we should focus on the ‘Short’ side. It is wise to remember that Market movement is based on what market insiders or big players are planning and doing, not so much on external news which normally are producing irrational behaviour. What to do from here now? I suggest to start selling all your shares now ( probably there is a chance for you to sell into any counter-trend rally in the next 7 trading days) or at least reducing and wait for a better time to buy back around late October and November.

About Syria. The chemical weapons story is concocted as an excuse to control oil and natural gas. That could be the reason for Russia to be the strongest supporters of current Syria’s government. Perhaps, the current ‘war concern’ is helping Obama’s to divert the attention on the current debt problems. So, in my opinion, US will once again goes into a new war unless Obama is facing strong opposition from Congress. ( Updated news-Congress is supporting to strike within 90 days)

In Asia the sentiment against the USA is at record levels and sometimes it makes you to wonder if the USA has transformed itself into the new Evil Empire. To me, this is unnecessary war and Obama is helping the evils to fight against evils - rebels fighting against the Syria’s government.


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