Saturday, February 13, 2016

Mark Cuban Lovin' on Gold

Mark Cuban said he has acquired a decent amount of call options on gold, citing the uncertainty and lack of clarity on where the U.S. and global economy are heading, adding he was confused about the market along with a lot of investors.

There are a couple of things that drive gold, and that is the fear trade and when there are no reliable indicators that can be counted on. Both of those are in play now, although the odd performance of the market still has some waiting on the sidelines with gold, because there is still a lack of conviction on that side of the play as well.

Even so, gold has made a nice 17 percent move so far in 2016, and had its best day in about 2 years on February 11.

I think part of the problem is some investors were persuaded the U.S. economy had decoupled from the rest of global economy, which in my view is ludicrous. How could anyone seriously consider that as legitimate when for a long time the global economy has been cited as the source of long-term economic growth. That's especially true with China of course, which is now floundering after building up a mixed economy build on demand and farcical projects. Built it and they will come was a major Chinese failure.

Another reason I see gold being held back is because of the clueless Federal Reserve, which sounds like OPEC and Russia, which continue to say they're looking to make a supply cut agreement. With the Fed, they keep on with their never ending "uncertainty" as to whether or not it's going to raise interest rates and at what intervals.

Just like alleged meetings between the Russians and OPEC temporarily prop up the price of oil and create an atmosphere of uncertainty, so does the lack of visibility and straightforwardness of the Fed, which I think is a move to, at least partially, rein in the price of gold and silver, and the fear that drives capital fleeing to precious metals.

With all this artificial propping going around, when the bubble does burst, it's going to be like a flood because of the pent-up concern that will eventually express itself in fleeing stocks and moving back into gold and silver.

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