Where Is Gold Going?

Where is gold going?  I think it is on the verge of another run to $1,000 per ounce.  If you haven’t bought gold coins and gold bullion yet, you had better buy gold coins and gold bullion now.  All of the signals are coming together and they provide one answer to the question of,  where is gold going?  The answer is up and soon!

Where is gold going?  That is the ten million dollar question.  If we were to know exactly which direction, how big the move and when, we would all be millionaires.  Since we can’t do that we have to go with the things that we can know about, namely history, through charts, patterns,  knowledge of the company and it’s management and events.  Gold coins and bullion are a little easier since they follow the two simple rules of supply and demand.  I know that some would like to add manipulation to the equation, but I do not feel that it is significant enough to really effect the markets once a major move is underway.  Manipulation tends to extend moves in either direction, but is not the cause of the move in the first place.

If we take a step back and look at the gold chart for the past year, we get a better feeling for where resistance and support are in the gold market.

Support is in the $850 – $870 area with the possibility of going lower towards $800, but I think that is a long shot.  Technically the support looks strong at $850.  $1,000 per ounce gold is the obvious resistance point. I think gold will retest the $1,000 mark between now and the end of June. Keeping that in mind, I would like to see strength in the gold stocks to lead the way up.  They had a nice move during the first four days of the past week, but stalled on Friday, which was a little disappointing considering that gold closed up $5.20 at $930.90.

Important Numbers to Watch For!

There are important numbers to look for as the gold market moves forward.  Whether this move begins before the end of June or is delayed till the fall is of no concern for the big picture.  The move up is coming for sure, it’s the when that is in question. I think it will be sooner rather than later.  Gold will move up while the dollar moves down. These are the numbers to look for in gold: $961, $1024, $1089 and $1156. At that point $1,000 per ounce gold will be the floor and gold will head off towards $1,224 and much higher.

The dollar’s numbers are much simpler:  .82, .72, .62, .52.  Once the dollar breaks .72 gold will accelerate up as the dollar loses strength. The break down of the dollar will lead to hyper-inflation.  All of the signs are pointing in that direction right now.

Quantitative Easing (read printing money out of thin air) and China’s refusal to continue financing the U.S. debt are the driving forces that control the markets going forward.  China is unloading dollars now as they buy gold and that trend will accelerate going forward.  It is the only way they can unload the ever increasing amounts of declining dollars that they hold. Consider this from Ambrose Evans Pritchard.

China fears bond crisis as it slams quantitative easing

China has given its clearest warning to date that emergency monetary stimulus by Western governments risks setting off worldwide inflation and undermining global bond markets.

By Ambrose Evans-Pritchard 07 May 2009

“A policy mistake made by some major central bank may bring inflation risks to the whole world,” said the People’s Central Bank in its quarterly report.

“As more and more economies are adopting unconventional monetary policies, such as quantitative easing (QE), major currencies devaluation risks may rise,” it said. The bank fears a “big consolidation” in the bond markets, clearly anxious that interest yields will surge as western states try to exit their QE experiment.

Simon Derrick, currency chief at the Bank of New York Mellon, said the report is the latest sign that China is losing patience with the US and aims to diversify part its $1.95 trillion (£1.3 trillion) foreign reserves away from US Treasuries and other dollar securities.

“There is a significant shift taking place in China. They are concerned about the stability of the global financial system so they are not going to sell US bonds they already have. But they are still accumulating $40bn of fresh reserves each month, and they are going to be much more careful where they invest it,” he said.

Hans Redeker, head of currencies at BNP Paribas, said China is switching into hard assets. “They want to buy production rights to raw materials and gain access to resources such as oil, water, and metals. They know they can’t keep buying bonds,” he said.

Hans Redeker, head of currencies at BNP Paribas, said China is switching into hard assets. “They want to buy production rights to raw materials and gain access to resources such as oil, water, and metals. They know they can’t keep buying bonds,” he said

China is clearly reading the writing on the wall.  It’s too bad that the U.S. leadership is so blind to what they are creating.  When the tide goes out on this financial crisis, not many things will be left standing as we knew them.  It is definitely time to buy gold coins and gold bullion on any pullbacks.  Once this candle is lit, there will be little opportunity to buy as low as this again.

Jim Rodgers is back at it again, predicting hyper inflation.  His take on the current crisis is as accurate as it gets.

A currency crisis is definitely in the cards.  The question now is will it only effect the dollar?  I think not.  We are in a global financial crisis and and the same players will experience the global currency crisis.  This is not a good thing for the world, but good and bad don’t enter into this.  Central bankers are spinning this tale without knowing how it will end.  Gold will benefit from this and it may be the only investment that will protect you going forward.  Take preventative measures while you still can and protect yourself by buying gold coins and gold bullion.

Till next time, good luck and good trading!

More Gold Market Analysis:

• Buy Gold Coins, Bullion to Hedge Dollar Drop
• Take It To The Bank, Gold Is Going To Run!
• Golden Reality Check
• It is Time for Gold Investing!
• Long Bond/Dollar Say Buy Gold

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