Gold is a “slam dunk sell”

What a bullish week for stocks last week. S&P is above $1700 and finished the week up 12,70 points or .75%. On the other hand; commodities are struggling. Gold is below it`s important $1300 level and are now trading at $1273. Next support to look for are $1200.

I told you about Barrick Gold and the big drop in their stockprice. Some say that many miners have a production cost of $1000 and $1200 to mine an ounce of gold. That means if we see a goldprice below $1200, we will see many miners closes their businesses.

If that is the next scenario, we will see a bigger demand and less supply, which means (in theory) a level of $1000 and $1200 is a strong support. Goldman Sachs say the gold is a «slam dunk sell», and they do not say that too often. Morgan Stanley are also bearish on the gold`s outlook.

ETF`s see liquidation into the goldrallies and money managers do not see the gold as an good investment right now. Commodities are deflationg right now and so are the gold. It will probably take some time for the «insurance buyers» to come back to the market again and take it higher.

In my opinion, what`s happening in the white house on thursday this week desides the direction of the goldprices. Desember gold futures fell on friday to $1268,20 an ounce. Down -3,2% on the week. Silver also fell on friday to $21,259 an ounce. Down -2,3% on the week.

As I have talked about earlier, the P/E ratio (price-to-earnings) in the USA is now 20. A company`s standalone P/E does not give you the full picture of how expensive a stock is. Therefore you need to look at the company`s industry or the broad index to understand the price.

The total price of the index divided by its total earnings is the P/E of an index. In Europe the P/E is 10. In USA the P/E is 20. But is that expensive? Today I have added a chart for the P/E in the USA. Take a look at the P/E ratio for S&P500 during the financial crises in 2008.

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