NEW YORK (TheStreet) -- Gold bugs continue to take a beating on concerns of the problems in Spain and Greece spreading across the rest of Europe. Gold, priced in dollars, rises when the dollar weakens relative to other major currencies and falls with dollar gains.
Along with currency moves, gold moves based on economic activity. Fears of continued sluggishness in Europe (along with fears of a slowdown in China) has removed some glimmer gold has enjoyed as an inflation hedge. The market is discounting liquidity promises by Germany as gold prices sink to the lowest prices of this year. Fears of elections in Greece rejecting bailout proposals are weighing gold down as well.
Investors have many choices to gain exposure in gold. The SPDR Gold Trust ETF (GLD) is one of the most popular and liquid methods to play gold prices.
Some analysts are calling recent weakness as an opportunity to buy gold. Indeed, gold trend lines based on weekly charts are decidedly bullish. The 60-, 90-, and 200-week moving averages are all trending higher, with the shorter time period averages above the respective longer periods.In Search of the Next Berkshire Hathaway >> A daily chart view of GLD is the opposite with a bearish outlook. All three moving averages, 60-, 90-, and 200-day moving averages are moving lower and the famous "death cross" of the 60-day (some use 50-day) moving below the 200-day moving average triggered some trend followers to short.
Global EconomiesI have written for months about the woes Europe faces and I believe the worst is yet to come. Protests in Spain are likely just warming up and Greece's population has made it abundantly clear they have no intention of living within their means or paying back their debt. Finally, if France moves to the left, Germany will be lone sober designated driver. At some point, one has to believe Germany will tire of chauffeuring "drunk on debt" countries and cut off the beer tap. With gold prices moving down so much in such a short period of time, I would expect a "dead cat bounce" soon. I also expect gold to continue downward, trading under $1,300 within a year absent a substantial bull catalyst. In the short term, look for gold moving higher as an opportunity to short.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV