Got Gold…?

Bullion Vault

US banks dumped a huge chunk of their “short” positions in gold just before it surged…

BAM! Gold broke out of its huge consolidation triangle, Wednesday 2nd Sept.,writes Gene Arensberg in the weekly Got Gold Report for the Gold Newsletter.

What are we going to do now? Why, for the short-term trading portion of the ammo pile, we recommend executing trading strategy and letting the strategy do the trading, of course. More about that below.

As the first week of September rolled in, the markets for gold and silver heated up. Why? “Tonnes” of reasons. Perhaps Adrian Day summed up one of our favorite drivers of this gold bull market in a CNBC interview with Bob Pisani Friday, when he said, in essence, that gold going up now is a vote of no confidence in the world’s “leadership” and another no confidence vote in the world’s fiat currencies.

Gold is going higher primarily because the supply of paper with ink on it is seemingly inexhaustible but precious metals supply is relatively constant. Gold is going higher because more and more people are converting the former into the latter pure and simple.

All over the world, chart-watching technical analysts have been waiting for exactly the event unfolded just as we entered the long three-day Labor Day holiday in the US and “Labour Day” in Canada. Whether or not gold follows through to the upside, make no mistake about it, this is certainly a convincing move underway.

A quick look at the two-year gold graph presents the bullish technical picture pretty well. The short version (no pun intended) is that gold has left the confines of a wide, symmetrical triangle consolidation; a consolidation firmly in place since the February turning high near $1,007 the ounce and the corresponding April turning low near $860. Since those two definition extremes gold has put in higher lows and lower highs, tightening into a narrower and narrower range until this past Wednesday.

Technicians love breakouts because they often mark periods of very strongly increased volatility in self-reinforcing fashion. Upside breakouts in a bull trend also confirm one of the primary tenants of technical analysis, to wit: “Consolidations are more often than not continuation patterns.” Meaning, of course, that the trading is expected to continue in the direction of the trend which preceded the consolidation.

If we look at a much longer term chart of gold, one going back to the beginning of the Great Gold Bull in 2001-2002, the clear trend has been for gold to “move from the lower left to the upper right,” as hedge fund operator and famous spread trader Dennis Gartman of the Gartman Letter is wont to say.

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