Thursday, October 16, 2008

Charts of the Day: Gold and Baltic Dry Index

One of the interesting charts I have been watching is that of Gold (above). Gold bulls have said for years that a runup in inflation, a weak dollar, and a global financial crisis would all serve to too a flight of investors into gold. They also said that all of this would push prices well above $1000.

Well guess what? We haven't seen it. To be fair, gold did have a nice run, but it didn't surpass $1000. Moreover, look at all of the panic we have seen in the markets lately. And during all of this, gold prices have been unable to make new highs, and have now moved lower.

Gold hasn't even been able to surprass its highs from mid-July. To me, this series of lower highs speaks to lower prices in the near future, not higher. Moreover, if this hasn't been the absolute best period or market phase during which to own gold, what is?!? Gold bugs had better craft a new story to sell.

Last, I wanted to show a snapshot of the Baltic Dry Index (below). This is an index that tracks the activity of global shipping rates, and is a proxy for how robust the global economy is.

As you can see, this index has absolutely plummeted. This is a sign that the global economy is slowing markedly. For those that continue to think that emerging markets will continue to growh through this period without a hiccup, this chart begs to differ.


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