$1000 Goes Up in Smoke

February 26, 2009 Gold Stocks, Physical Gold, Politics No Comments

Market pressures build as $1000 goes up in smoke. Are market events and psychology coming together to form the perfect storm for gold as $1000 goes up in smoke?

The DOW is recovering from yesterday’s loss, up 69 at 7,339, the NAS is up 4 at 1,429, while the dollar has slipped a little, down .27 (.35%) at 87.61 and gold is going up in smoke, down $12.10 at $940. This is the fourth session in a row where the gold price has dropped since breaching the $1000 level. This is in no way surprising to me because round number marks are psychologically difficult to overcome and even more so when passing the round number changes the dollar value from three digits to four. Make no mistake about it, gold will breach and move well past the $1000 mark. The only thing in question is the when of it. The more times gold goes to $1000 and pulls back, the more violent the upside move will be once it passes the mark for good.

storm cloud forming $1000 Goes Up in Smoke

Is Gold's Perfect Storm Forming?

With the U.S. markets moving higher today and crude oil rising to it’s highest level in the last 30 days the downward pressure on gold increased. At the risk of being called a “conspiracy theorist”, it is important to realize that whenever the powers that be can bring the price of gold down, they will take advantage of it. Gold is the antithesis of the fiat currencies. If your wealth and power is vested in the dollar maintaining value, then it is only natural that you would jump on the train when you saw an opportunity to move value towards your side.

This is the stuff that free markets are made of. Someone sells a stock or commodity because he feels that there is no longer upside potential and someone else buys the same stocks or commodities because he feels that there is upside potential in the same issues. It is easy to move a market in a specific direction when it is as small as the gold market. If you throw your money in short at the beginning of an up move it is more than likely that you will be swallowed up in the momentum of the move and have no effect on the direction of the move. If you wait until you see sentiment beginning to change and profit taking picking up speed and then throw your money short you are adding another push to trend that is turning in your favor. The various groups that do not want gold to break and stay above $1000 per ounce have played this game for a long time, know the rules well and have a lot of money to move in and out of the market.

While the price of gold per ounce is being pushed lower a curious thing is taking place. The price of gold stocks has reversed the trend it was in, which was down, while the price per ounce was rising and they are moving up quietly. This is a bullish signal for the future of gold. If gold is to break and stay above the $1000 mark it would be helpful if the gold stocks were to lead the charge. When people move into stocks, they usually do it because they think that they will go higher. DUH! When gold and gold stocks rise together that will open the doors to institutional money which will in turn propel them higher in multiples.

Here are the current prices of some of my favorites. ABX up .06 at 31.22, GG up .73 at 28.62, KGC up .40 at 15.56, NEM up .45 at 40.52 and RGLD up 1.10 at 41.30. One day does not a trend make, but it is encouraging to see the gold stocks moving up while the per ounce price is pushed down.

Add this together with the deficit expanding, businesses getting hammered, unemployment up, housing prices down and a “stimulus” package that isn’t stimulative, and the perfect storm for gold is forming on the horizon.

Till next time, good luck and good trading!