The Gold Report: July 13–20 was an unusual week in the gold market. In a May newsletter to Trapeze Asset Management clients, you argued that the glass is “half full” for investors given current macroeconomic signals. Much water has traveled under the bridge since. Has your view changed?
Randall Abramson: Our view has not really changed. We rely on certain macroeconomic tools to show us red flags. One is our economic composite that looks at both the U.S. economy and economies around the world. Our economic composite tool currently forecasts smooth sailing with no red flags.
From a stock market perspective, our relative indicator momentum, which is our other macro tool, only shows Brazil and Russia on sell. The only other market on our watch list recently was the Chinese market. It came down to the bottom of its TRIM line but didn’t break through. In fact, it did a perfect bounce off of the bottom. I’m hoping that indicates that what we’ve seen recently in commodity prices is overdone.
“St Andrew Goldfields Ltd.’s Taylor mine is coming on line in the next two months.”
That said, we do not like recent action in the Australian and Canadian dollars. Both currencies can portend further economic weakness because both countries are essentially hewers of wood and drawers of water–economies based on the extraction of natural resources—and we are cognizant that the commodity-hungry Chinese economy is clearly slowing, though it is still performing at a significantly higher rate than those in the rest of the world. Perhaps that’s causing some of the weakness in “Commodityland.” But according to the signals, the glass still seems half full.
TGR: How do you explain the recent 4% drop and five-year low of the gold price to Trapeze clients?
RA: That drop happened in a flash—a …read more