Gold rises above $1,050 an ounce, silver almost $18

Thanks to www.purusaxena.com for this chart showing the gold break-out above the previous all-time high of $1,030. The next few months could be very exciting for holders of precious metals and their stocks.

The only cloud on the horizon is a widely anticipated stock market correction that would likely put an immediate damper on all commodity prices. A recent meeting of senior market contrarians all came to a consensus on the imminence of this correction, unless you choose to be contrary about the contrarians!

Crash coming?

However, any storm in financial markets might be seen as yet another good reason to own gold and silver. It is also not true that gold and the dollar have to be going in opposite directions, they can both rally in extreme situations like a crash. Precious metal stocks would take the biggest hit rather than the pure metals.

The stock market correction is proving as elusive as the global economic recovery but seems far more certain given the 40 per cent over-shoot from fair value, and the normal stock market recovery cycle appearing in six months rather than the usual three years.

The inflation gold is warning us about is currently an asset price bubble in stock markets and a few national property sectors (China, UK). The real economy is in mild deflation with output significantly down on a year ago and trade much lower and credit very much tighter for everybody except the banks. This is not a recovery in my book.

Trade in Dubai

Dubai Chamber of Commerce has just boasted a return to $4 billion in monthly exports compared with the peak of $6.8 billion last October. Strange DP World claimed Dubai trade had been the least affected by the global slump but whatever, is this much of a recovery? And if this is Dubai doing better than average what about the others?

Presumably some glint of reality will eventually filter through to the lofty world of stock markets to correct their talk of recovery. Down on the ground there is no recovery, or nothing worthy of the name. More like a small bounce off the bottom. Recovery is surely a clear path back to where you started.