Market Update 25 Jan 2013 – Everything Up but Gold Stocks


This was a good week for everything but gold stocks and coffee.

All the currencies were higher, led by the free market Bitcoin, which continued its near vertical ascent, adding 8.1% to last week's 9.1% rise, closing at 312.2 mg.  The Euro was the strongest of the government issued currencies, up 1.8% while the CAD was weakest, up only 0.2% – now at parity with the USD at 18.7 mg. More on the USD below. The Japanese Yen closed up 1.7% at 0.210 mg, hovering near its all-time low of 0.205 mg, set the weekend before. Look for more weakness here as the Japanese government printing presses begin to run overtime.

Long term bonds (TLT) were virtually unchanged, but the shorter maturities (SHY) recovered most of their loss  from the prior week, gaining 1.7% along with the USD to close at 1.56 mg.

The Dow Jones Industrials led the way for stocks, rising 3.6% to close at 260.4 g, well above last year's persistent resistance level of 253 g. Watch closely next week to see if this is a breakout or a fake out.  The Nikkei rose 1.4% to close at 2.29 g, gaining back much of what it lost the previous week.

Gold stocks, as measured by the HUI index, were the weakest asset class this week, falling 5.6% on top of last week's 2.6% decline, closing at 7.48 g. This is a new low for the last 4 years, and sits only 16% above the 2008 low of 6.45 g.

Coffee was the only commodity to close lower for the week, falling 3.5% to close at 27.8 mg/lb. Coffee is now down 32.1% from a year ago, making it the worst performing asset in our table for that period. Cotton was the best performing commodity this week, rising 4.3%, beating all other asset classes except bitcoin.  Copper more than recovered its losses of the week before, gaining 1.7% to close at 68.9 mg/lb, while silver extended last week's gains by a further 0.9% to close at 0.59 mg/oz.

The US Dollar finished the week at 18.7 mg, 10.02% above the value predicted by the "Half Life" curve. Above this level, I think it makes more and more sense to reduce holdings of USD correlated assets like government issued cash and bonds, and use that extra purchasing power to add to holdings of precious metals (especially platinum, currently trading just 1% above gold parity) and other "anti-dollar" assets.  Given the current bargain basement prices of gold stocks, I would suggest you put them at the top of your shopping list.

Table of prices in gold for week ending 25-Jan-2013

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