Gold Returns to the Trading Range

November 14, 2008 Gold Stocks, Inflation, Physical Gold No Comments

Until I can get the charts up on this site, I will start with a quick state of the market at the time of this writing. The DOW is down 304 to 8,530, the NAS down 66 to 1,529 and 24 hour gold is up $9.60 to $744.50. Now that the house keeping is done, let’s get on with the fun stuff.

This comes to us this morning from Bloomberg.com written by Pham-Duy Nguyen.

“Gold rose the most in eight weeks on speculation that central banks will add more liquidity to unfreeze credit markets, spurring inflation and boosting the appeal of the precious metal.”

“Speculation”, come on, the Fed and central banks have been flooding the world with liquidity and there is no end in sight. It simply baffles me how these statements are taken as news and how the public is lead around by the ring in their nose. Wow, there is a possibility that central banks will put liquidity into the system and that might, just possibly, effect the value of the dollar. Wake up people, inflation is caused by increasing the amount of money in the system. If there are ten dollars in the world and they are trying to buy a limited amount of goods the price is set by that ratio. If you multiply the money by thousands, if not trillions, while keeping the amount of available goods the same, the price cannot help but rise. The theory is simple. I’m simple. It doesn’t take a rocket scientist to figure it out. What this world needs is a massive injection of common sense. It is coming to the markets soon, whether they want it or not.

Printing Money Gold Returns to the Trading Range

The Sound You Are Hearing Is The Devaluation Of The Dollar

Spurred by this wild “speculation”, gold moved, in one 24 hour step, back into the trading range near the upper $750.00 range. The $750.00 range is resistance with the $720.00 mark being support. I think that the market may trade sideways here for a bit before moving through the $750.00 resistance, but if we have learned anything lately, it is that nothing is clear and that this market is capable of anything. The fact that gold dropped to the low $700s and bounced right back through the $720 range within 24 hours is a very positive sign. I am not an “expert” chart reader, but this does not look to me like gold, wants to go into the $600′s. Suffice it to say that buying came to the rescue to keep gold in the trading range. I for one would like to see gold, stay in the trading range for the time being and consolidate it’s base.

The stocks have not yet followed the price of gold up, but I feel that they will soon climb aboard the train. It is still early, but I feel that gold’s rebound before breaking $700.00 is very significant and once a new trend is established, the stocks should catch up and lead the way. These are uncharted waters, for gold and the markets. One thing is clear, massive liquidity is being fed into the system and what follows that is massive inflation. Can any one say Weimar Republic?

Till next time, good luck and good trading trading!