Quick Gold Market Update

There never seems to be enough time...

As we've been prepping a global health update, a commodity update, and an equity market update for 2010, all hell has broken out with the euro (Greek debt concerns), China (attempting to slow inflation), and Obama (changing the rules and creating uncertainty after an ugly Democratic loss in Massachusetts).  Needless to say, we've been trying to update things and present them while in the midst of managing the impact of this mess.

While we'll post updates (hopefully tomorrow) on everything, suffice to say that it looks like we're going to see that long awaited market correction (preliminary target of 1050 on the S&P, to be updated soon), a potential new euro target of 1.36, an extended dollar rally, and a bigger than expected impact to commodities and gold.

The nice part--gold is likely close to a bottom, even in this mess.

As the chart above shows, there's still some potential downside with the RSI and slow stochastic not having reached their optimal levels, but we're just below the intermediate term trendline from November 2008.  Since then, gold tends to rebound after touching this line or going just below it.  We'll likely double tap the line in the next week by having some gold prices rise in the next few days, and then a retest of the line, allowing the indicators to roll over to oversold.  This is probably a good buy point with little downside relative to upside.  Gold stocks may continue to move down  as the rest of the market corrects.

Also, note that the TED spread is still quite low as seen below.

Corporate bonds are holding in there, but junk bonds are starting to weaken.

At this stage, we appear to simply be going through a correction with more downside for equities but a bottom forming in gold.  Commodities as a general group are likely to react to the euro direction.  That analysis is underway, and more reporting will be done tomorrow...