COPPER - --CORRECTION

Copper prices have sold off in recent weeks.

A slowdown in the developed world  is resulting in slowing chinese demand.

The recent rebound in the oversold USD has been accompanied with a sell off across asset classes, and Copper has been no exception.

Question is, are we headed into a global recession and is Copper just flashing a warning sign?

GOLD : VOLATILITY AND HOW!

As expected, Gold prices finally corrected from recent highs.

Many Gold bugs are panicking and as prices plunge, & investors are wondering if Gold's mega rally has finally run out of steam.

Firstly, I continue to believe that Gold's long term fundamental story is still intact.
The current state of govenment finances  combined with the ongoing post bubble debt deleveraging will mean that Gold will continue to retain its safe haven status.
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Secondly, Gold has not suffered any serious technical damage on its long term chart.
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Thirdly, a pullback in prices was long overdue after gold's monster rally from a sub $1500 price level.

Below is a link with some interesting charts.
Bull and Bear case for Gold, Silver and Stocks -- Looking at the chart below, gold prices have pulled back after testing the upper price band (Red line) of the chart.

Could we see a pullback to the green trendline like the 2008 correction?
As someone rightly said--Never say never!

Lastly, I would advise Goldbugs not to panic, but to just hold on patiently for now.
The troubles of the US Housing & Financial sector of 2008 have now morphed into stressed government finances and Sovereign debt crises of 2011.

In 2008 many corporates (especially in the financial sector) were downgraded by the rating agencies.
In 2011 several governments have had their Sovereign Credit ratings downgraded.
Once again the Credit rating agencies are raising red flags rather late in the day!!!!
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As David Rosenberg recently pointed out, the aftermath of a post bubble debt deleveraging saga is no 'garden variety' recession.

Gold is still the last refuge in this storm, but investors will have to learn to ride out some mega volatility and corrections along the way.

GOLD : TIME TO TAKE A STEP BACK NOW

Gold continues it's fantastic run.

Just a word of caution to the permabull gold bugs.

The 50 day ma is at $1675.80 & the 200 day ma is at $1495.30.

After rallying by almost 47% over the last year, we could see a sizeable pullback without doing any technical damage on the charts.

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In the meantime, continuing concerns of the sovereign debt of Club Med , Central bank interventions in the currency markets (like the SNB yesterday)and debt and deficit worries in the U.S.A. will continue to support gold prices. Expect more volatility ahead of President Obama's Speech on ''job creation'' and Ben Bernanke's speech this week!

GOLD - LONG TERM CHART

GOLD : Overextended after a massive run : more volatility to come

After testing $1900, gold prices have corrected sharply. In the near term prices continue to remain overextended, well above supporting trendlines at $1640.

I continue to remain a long term bull, but would once again remind readers that in the short term, gold prices will continue to be volatile and reacting to options expiration and the FED's Jackson Hole meeting at the weekend.

Here is a fantastic chart from Jesse's Café Américain - a super site for all gold related news and excellent unbiased market analysis.

Thomas Friedman - on a Theory of Everything (sort of)

A precise article by Thomas Friedman about the current state of unemployment, credit and strained government finances.

A Theory of Everything (Sort Of) - NYTimes.com

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MARKET UPDATE: THESE ARE CRAZY DAYS

Just a quick post today before I put up some detailed analysis soon.

There's so much happening in markets these days - Debt Ceiling, US AAA downgrade, Equity Market crashes, a really manic VIX (Volatility S&P500 ^VIX), UK Riots and all the ongoing discussion of the ''fragile'' global economic recovery!!

Below is a snapshot of todays wildly gyrating markets! For the ''goldbugs'' out there, Gold has been riding high, driven upwards by all the uncertainty & it is overbought in the near term!

The FED has signalled that it wishes to keep rates at record lows well into 2013!----the recovery must be more fragile than they first thought.

Overall, I would refrain from any risk taking at the moment and would look to hedge gold positions. In the medium term, I expect gold to continue to be volatile in a price range of $1550 to $1780(New all time high as of today).

Will come back with some market specific ideas soon.

THE ONGOING RECOVERY - NOT!

As the US Government is negotiating to raise the US Debt Ceiling, Central Bank Governors around the world are struggling to keep the fragile economic recovery intact while tackling inflation concerns at the same time.

Below are some magazine covers, that you would not expect to see at this stage of a economic recovery!

US ADJUSTED MONETARY BASE - Chart from St Louis FED

Clearly there's more stimulus to come, as the never ending recovery from those dark days in 2008 continues. The FED really has a tough job on its hands.
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Talks of a possible QE3 could add more fuel to rising commodity prices, while a cancellation of a proposed plan for QE3, will not go down well in these jittery markets!

Below are two Charts of the Adjusted US Monetary Base. (5year + Long Term)
2011 has seen the graph spike sharply updards, a trend that is clearly not sustainale !












Meanwhile the Precious Metals sector has had quite a rally over the past week, with Gold prices topping $1600, and Silver just about getting over the $40 level. Perhaps, the Gold market is pricing in a possible QE3 further down the line.
I continue to be cautiously optimistic on the precious metals sector over the next month and a half; i.e. until the end of August 2011. These summer months have traditionally been seasonally weak for the PM sector.

INDIAN EQUITIES - AN UPDATE

Here's an article titled - 'A Two - Tier Market' by Akash Prakash from the Business Standard Newspaper dated 8th of July 2011 - Mumbai edition..

He addresses the issue overvaluation of the consumer-staples sector and highlights the difficulties of buying high-quality companies at a reasonable price in the Indian Stock Market.

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Currently, many consumer staple stock trade with PE ratios of 30-35!

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On the other hand, investors continue to shy away from industries that are in need of capital, mainly due to concerns of poor earning visibility. Many infrastructure companies are facing great difficulty in raising capital.

The article is a fantastic read.