Gold looks to new highs (ig)

8/7/2019 Gold looks to new highs (ig)

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7th April 2011

Gold looks to newhighs



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O N D 2008 A M J J A S O N D 2009 A M J J A S O N D 2010 M A M J J A S O N D 2011 M A M J

650

700

750

800

850

900

950

1000

1050

1100

1150

1200

1250

1300

1350

1400

1450

1500

1550

$873 Prior High in 1980

Prior High support $732

1033.90 High

1227.50

Gold 100 Troy Oz. COMEX Continuous

11

er

18 25 2 9 16

November

23 30 7 14

December

21 28 4 11

2011

19 25 1 8

February

15 2 3 1 8

March

15 22 28 4

April

1 1 1 8

50000100000

150000

13001305131013151320132513301335134013451350135513601365137013751380138513901395140014051410141514201425

143014351440144514501455146014651470147514801485149014951500150515101515152015251530

1430 High1436.70 High

1447.20 HighHigh 1450

Gold 100 Troy Oz. COMEX Jun 11

Gold looks to new highs

MONTHLY CHART

The market has been recently drivenby a series of powerful bullstructures:

1.H&S continuation pattern ( whosetarget - a minimum -was achieved at1250 or so)

2. A continuation Triangle whoseminimum target remains above themarket at 1480 or so.

DAILY CHART

But this chart in the Jun 11contract adds further excitementto the bulls case: note that themarket has overcome thesuccession of Prior Highs Pivotsat 1430, 1436.70, 1447.20 –

which move has now establisheda powerful band of supportbeneath the market.

Better still, a continuation Trianglehas been completed, whoseminimum target lies up as far as1520 or so. The bulls are incharge.



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FUNDAMENTALS:The long bull market in Gold looks set to continue, as the market makes new highs

driven by a combination of dynamics that include some new and some longerstanding.

A key feature of this market over the last few years has been the weakness of the

Dollar, and although there have been periods of Dollar strength, these nowstand out as periods of correction.

Why does a weak Dollar matter for Gold?

The Dollar is the World’s sole reserve currency, therefore prolonged periods of Dollarweakness, especially when driven by inappropriate policy, erodes the wealth ofthose using it as a reserve and forces them to seek an alternative currency.Since none exists there is only one alternative and that is the ancient store ofwealth: gold.

The other dynamic which has been less constant, but has re-emerged, is inflationand the fear that rising energy prices and commodity prices will drive up further

the level of inflation globally.

The ECB raised rates today for that very reason and the Central Bank of China hikedrates earlier in the week, the forth in the current series, due to similar fears.

These inflationary fears are adding to Gold’s attraction, as it erodes wealth held inpaper money over time, but acts to drive up the value of Gold since it is

independent from any national policy and is fully convertible against any othercurrency.




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FUNDAMENTALS: CONTINUED

But as the Global economy is still only in the early stages of recovery, with the USeconomy just beginning to gain traction after the Fed has resorted to severalepisodes of Quantum Easing after what was a deep and damaging recession, why isinflation presenting as a risk so soon?

The main reason for most economies is the rise in commodity and energy inflation.

Unlike previous periods of economic recovery, the traditional developed nations ofthe west no longer have the monopoly on economic power. Over recent years theyhave been joined by the large emerging economies of China, India and Brazil.

The first two are building their economic strength on manufacturing - especiallyChina and they are voracious consumers of natural resources and energy, inparticular oil. The Chinese economy faired much better than those of the US, UK,

EU and Japan during the recession and kept expanding. So, now the establisheddeveloped economies are starting to grow, demand for raw materials and energy isincreasing from an already elevated level.

With fears that peak oil production may have already passed, the price is beingpushed up and the recent uprising in the Arab world has raised the risk premium onthis essential commodity.

So as the western economies struggle to respond, while at the same time deployingexceptionally lose monetary and fiscal policy designed to help growth, investors fearinflation will cause a general devaluation of national currencies, especially the USDollar and seek a neutral hedge in Gold. Until these inflationary pressures arecontained through tighter fiscal and monetary policy, Gold looks set to rallyfurther.




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Gold looks to new highs (ig)