Sunday, March 4, 2012

Gold plunges as Bernanke stands pat; recovery strengthen

All signs are pointing to a somewhat weak but encouraging economic recovery in the US. Fed Chair Ben Bernanke testified last week that the recovery is accelerating and unemployment is falling faster than expected. He also said that if current trends continue, further stimulus measures would not be necessary. This was bad news for gold bugs who were relying on the central bankers to print more money, thus debasing the US Dollar and enhancing the appeal of gold as a store of value. Gold plunged $80 after Wednesday's testimony and finished near $1715. US stocks fared better as investors continued to wager that the recovery could sustain itself without the Fed's ongoing intervention. The Dow was mostly flat for the week and still failed to move above the 13,000 level. India fared worse, however, as it remains more vulnerable to the inflationary effects of rising oil prices. The Sensex lost 2% closing at 17,636. This outcome was largely in keeping with expectations as I thought the market was unlikely to rise in the face of the Mars-Saturn aspect. I also thought that Indian stocks were susceptible to further declines.

Now that Bernanke has not promised further stimulus, the economy had has its training wheels removed as it tries to recover under its own power. Obviously, if things get bad again, the Fed would likely step in, but that is perhaps less likely since it would generate more inflation. With oil already above $100, a further price spike as a result of more quantitative easing would likely be detrimental to the economy. Bernanke can thank Jupiter for the relatively smooth sailing lately. The Jovian orb is the symbolic repository of all things optimistic and expansionary and its series of aspects from October to the present time is one very important reason why stocks have recovered from their 2011 lows during the depths of the Eurozone debt crisis. Some of this Jupiterian emphasis has produced some unhealthy excesses, however, such as the rising price of oil.

The question for us is: what happens when Jupiter weakens after its aspect with Pluto and Mars next week? This latest Jupiter aspect will be the last in the series of fairly intense aspects for a while. After this has culminated, astrological theory suggests that the positive energy will tend to dissipate and the market will become more likely to decline. Jupiter will form new bullish aspects later in the year, but this Pluto contact may act as a kind of bookend. After all, it was the previous Jupiter-Pluto aspect in October that closely correlated with the market bottom in the US and the subsequent rally to the end of October. Once the aspect culminated, the market corrected in November. Could this happen again?

This week the market will likely remain in the warm embrace of the Jupiter-Pluto aspect as it approaches culmination. The early week features a bullish-looking Mercury-Uranus conjunction. There are also some fairly positive Venus aspects through in for good measure. Perhaps the late week will see a better chance for some declines such as when the Moon conjoins Mars in Leo on Wednesday and Thursday. That is one possible interpretation anyway.