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Monday, December 18, 2006

Gold catches a bounce this morning

The real trick will be how gold ends the day. From Bloomberg:

Gold Rises From Six-Week Low Amid Buying by Jewelers, Investors

Dec. 18 -- Gold rose from its lowest in more than six weeks amid buying from jewelers and investors in Asia.

And note this line...

Still, the precious metal is unlikely to rise beyond $630- $640 an ounce as the year ends because of clusters of orders to sell at that level

Have you noticed how bearish sentiment is getting on gold all of a sudden. At the same time, we're seeing bullish sentiment on the US dollar, even though our Treasury secretary was just in Bejing, groveling before the Chinese to ask them to modify their policies and let their currency rise against ours. Well, considering the fact that the Chinese turned him down flat may be reason enough to be bullish on the dollar.

But I don't think so. Nor do I believe the near-insane levels of bullishness on the Dow Jones Industrial Average are warranted. I'm still bullish on the economy as a whole for 2007, but I think we're approaching correction territory, don't you? Look at this chart... it's classic divergence.

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