Gold: Musings & Peptalk
SUDDEN SHIFT, FICKLE FOLKS
What a difference one week makes! With a gold price daring the $1000 mark in defiance, boldness prevailed, investors took heart, analysts cheered, and the establishment cringed. This week, with a very ordinary selloff in consolidation, optimism has vanished in what can only be characterized as silly. Gold & silver will take over the globe as anchors in a sea of shifting sands, all in time. We have seen the crude oil price fall from $140 something to $40 something, the Dow Jones Industrial stock index fall from 14,000 something to 7000 something, the housing price index fall every month by over 10% on an annual basis, and hundreds of billion$ vanish in bank equity. But gold falls from $1000 to $940 or $950, and suddenly the precious metal story is repudiated? Utterly absurd! The currencies of the world are one by one being discredited. Gold and only gold can take the mantle within the financial sector. Gold and only gold can grab the reins of the horse team run wild. Watch as crude oil and energy supply generally takes a different mantle within the barter arena of the commercial sectors. They will bypass the corrupted commodity price discovery system. New currencies have already been agreed upon. Their inception requires only the passage of time. They will be launched amidst the growing crisis whose script has been written.
CONSOLDATION AT THE HANDLE OF THE CUP
The gold price broke above the 980 resistance level. Doing so technically did not come convincingly though. The U-shaped reversal pattern is clear, nicely rounded, enough to warrant the name ‘Cup & Handle’ from the charting lexicon. The top of the cup is 980 on the left side and 1000 on the right side. The positive bias is bullish. Notice all moving averages are in bullish mode, having crossed over. The bull run in gold has come from a bottom of roughly 700 up to 1000. The corrections in December and January were not small. Now the February correction might not be small. But they are fit within the bullish scenario. The MACD cyclical still looks healthy and strong. Support in the current pullback and consolidation appears to be in the 900 to 925 ribbon range. THE GOLD CHART IS CARVING OUT THE RIGHT SIDE HANDLE IN THE CUP & HANDLE REVERSAL PATTERN. From there, a breakout comes.
Never lose sight of the fact that a slightly lower gold price continues to attract foreign investment funds. The Chinese, Arabs, Japanese, Koreans, Russians, and Germans all sit on vast USTreasury Bond holdings. They are nervous. They are converting to gold gradually. They will demonstrate some patience. Don’t expect them to wait for anything lower than 900. My expectation is for 900-925 to act as a powerful oppositely charged magnet, and repel gold upward. The next leg for gold will easily surpass the important $1000 mark. Its leg will start close enough to $1000 in order to put some distance behind it. Some day in the future, and not too distant, the gold price will look at the $1000 mark as far below its current price.
GOLDMAN SACHS LIQUIDATES
A small news item appeared in the press this week, one which gathered almost no attention. If Morgan Stanley expects gold to slide all year, and silver to slide all year, like down to $11 per ounce in a corporate research forecast, then maybe they should tell Goldman Sachs. The kings of insider trading, taking full advantage of both USGovt implemented policy and politically managed commodity indexes, Goldman Sachs made an important move. They covered their remaining 69 short gold futures positions on the Tokyo Commodity Exchange (TOCOM). They have reduced their position to zero. In May 2006, the GSax position reached 52,000 short gold contracts. Now it is zero. TOCOM is unique, unlike the corrupted US commodity exchanges, since it requires all parties to post and publish their positions in a public manner. So Goldman must know something about the hugely positive prospects of gold. How about the new currencies to arrive by the stork in about one year time will all contain a gold component??? The simplest statement one can make about Wall Street is that traders became traitors.
INVESTMENT DEMAND SOARS
The establishment that embraces fiat currencies prefers to announce that jewelry demand is down in India, down in general globally, due to price reactions. How about telling the other story? That would be how the gold investment demand and silver investment demand has soared 400% in the last year or so. The data is astounding, but such a story would go counter to the belief that gold is a commodity. Gold is money, and fiat currencies are essentially denominated debt. Investment demand has soared since debt destruction has exposed currencies to be universally deficient, unmasked as debt instruments. The global banking system has been ruined by virtue of both the ridiculous growth in debt and the indefensible foundation of currencies. Furthermore, the coin shortage is touching all corners of the globe, as investment demand reaches levels to alarm officials. Maybe the USMint will close a few days per month, just like the California government agency offices.