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Thursday, November 6, 2014

Trader Dan Norcini on gold


Dan Norcini - HUI/gold ratio hits lowest level ever recorded. Some charts, for those of you who care. I found this comment by him to be very important, and something I'd like to keep in mind:

Here is the simple truth - the Dollar has been surging against its competitors; Central Banks have signaled their intention to either keep interest rates low or to provide stimulus or both; and commodity prices in general are falling. In that environment, one in which inflation is not a concern, stocks remain the GO TO asset class. Until that changes, gold is not going to attract sufficient capital flows from serious money managers and hedge funds to keep it levitated. Since the path of least resistance in the metal is therefore lower, that is exactly where it is going. There is no mystery whatsoever to any of this nor is there any conspiracy to force the price lower. Specs simply are not interested in an asset that pays no yield and which requires an overall economic environment in which its price is more likely to head higher.

I guess this is the same with all commodities, and that's why DM bull markets happen alongside commodity bear markets? Is the possible speculative premium really that high?

Anyway, so I guess Norcini would suggest that the goldbugs won't see a long opportunity til fundamental supply/demand tips the scales so obviously that it lures the speculators back in. I guess that could take a decade, if god hates goldbugs enough.

Has there ever been a commodity that experienced a secular bull market while there was a US equity secular bull market, by the way? It would have to be a dwindling commodity, I'd think. Any ideas?

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