Author Archives: Beta Market Analyst

About Beta Market Analyst

I am a veteran trader, and market teacher. I have trained students who were looking to learn more about the Commodity and Stock markets, and how different events, circumstances, the Fed, Interest Rates Etc, can move markets. I have trained these students and helped them increase their knowledge of the markets and they are better prepared to make trading decisions based on my training. For Instance, I taught them why the US Dollar was falling last year and in the beginning of this year due to the FED's Quantatiive Easing program. I also taught them that this program caused a rise in gold and silver and most other commodities. I have also taught them how the Euro and the European Debt Crisis effect the markets. I teach them how the market moves with a risk on trade, and with a risk off trade. I teach them how currencies move in relation to each other and what is going on in each countries central bank policies.

Gold Wheres it Going? How the World’s Safehaven has lately turned into Just another Risk Asset

Gold has been one of the hottest investments on the planet the last few years. However only a few people understand that there is a lot of money to be made on the daily, weekly, and monthly, fluctuations of gold. “Gold bugs” will tell you and they are correct its an ultimate store of wealth, hedge against hyperinflation, hedge against US fiscal problems with US dollar, and so on.

I am here to give you a different perspective. All of those are correct, but lets get down to the core of why gold moves and how it does move.

In August, the US got downgraded from AAA to AA from S an P ratings. This caused a huge move in Gold based on Safe haven demand.  There are two reasons gold moves, either it moves as a safe haven asset when the stock market is crashing, US political gridlock damages economy, Fed Cuts Interest Rates, Fed prints more money via quantitative easing etc.  The move that has taken Gold from 1000 to where is it now is the QE1 and QE2 Programs enacted by our federal reserve.

When you look at the Financial Crisis of 2008,  Gold hit a high of 1000, and during the crisis sold off to below 800.

The same thing has happened with the European Debt Crisis, even though gold is still a winning safe haven trade, when big Hedge Funds, are loosing a lot of money they have to sell their winners to cover losses. John Paulson , of Paulson and Co, was the largest shareholder in the Spider Gold ETF GLD.  His 13f Filing shows he recently cut a big position in gold. His fund is down 44% this year, and this is from a guy that made billions betting on sub prime mortgages to fail, which means his investors made money while everyone else in 2008 lost.  His other trades were doing so poorly that many in the market feared he would have to sell his only big winner gold, in order to help his fund. All other hedge funds followed.  This is why we have seen a change in Gold lately.

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IMF Loan for Italy, Spurs Risk On Trade in Stocks and Commodities

The markets were hit hard last week on fears of Italy’s growing problem with the borrowing costs rising on their bonds. This lastest fear on Italy only adds to the fire of contagion and fear spread through the EU Region. Last week was the worst pre-Thanksgiving  for our Stock Markets since 1932. Last weeks deep sell offs in commodities and stocks were driven by risk off trading aversion, due to the events in Italy and Greece.

The markets have been stuck in a pattern with bad news coming out of Greece and Italy, and other EU region countries sending the markets into a risk off mode.  When the markets going into risk off mode, it leads to deep sell offs in our equity markets and commodity markets as well as hits markets around the world.  Some fears of a China Slowdown, also rocked the markets last week. Worries that China is slowing down are fueling the fire that the Global Economy is on the brink of recession and headed for trouble.

This markets can turn though on a dime if the news and events improve overnight.  It is now Sunday night, and the news out of Europe is that the IMF is preparing an emergency loan package for Italy in case things get really out of hand and they have the money they need to keep their country operating and to prevent a default on their debt.

This news is changing the market sentiment around the world, and is fueling a large surge in our equity futures. Our Equity Futures and commodities are rising on the news as traders go back on a risk on mentality with good news from this loan, and with a great sales number for our Retailers for Black Friday Sales.

I would urge traders to be cautious and to wait this out. One more piece of bad news out of Europe can send us right back into risk off mode and fuel another sell off.

For now it appears the market will go back and forth until there is either a huge effort that really stops the fears of the EU debt crisis such as a large Quantitative Easing program developed by the European Central Bank.

Until we get such a progam the markets will move in lockstep with what is going on out of Europe.

 

Beta Market Analyst