Chart of the Day: Strong Breakout For Gold

The chart above shows the strong breakout in gold. This is actually the gold etf (GLD), but it tracks gold prices very closely. You can see the strong volume spike yesterday as gold broke out convincingly above recent resistance.

Gold has been strong in conjunction with the weak dollar, one of the primary factors in the recently rally. There is a lot of chatter about the weak dollar, and central banks around the globe trying to diversify their dollar holdings and boost gold reserves. So should you be chasing gold prices higher?

Central banks are notoriously poor market timers, and I would caution against falling in love with gold just as it is breaking out to new record highs. We are long gold in our portfolios currently, but I will look to take some profits if prices continue to rise short-term. A strong bounce in the dollar could easily shake out a lot of the newly minted gold bulls, and spark a sharp pullback.

Outside of gold, the markets were lower in premarket trading, but have since climbed back into positive territory. The first few earnings reports from the likes of YUM, COST, and MON all came in ahead of estimates - a good sign. Earnings season kicks into high gear next week, and will likely become the new catalyst for stocks at the margin, taking the wheel from the dollar, which has been the primary focus lately.

Asian markets were higher overnight; the 10-year yield is slightly lower at 3.20%; and the VIX is -1.5% lower to 25.30.

long GLD

Comments

[twitee:]

This is only the beginning of the Gold investment. There are many investors still in denial of the inevitable.

Oct 07 12:33 PM

[Mad Hedge F...:]

tre Of course you knew it was going to happen like this. After churning around just below the old high, and sucking in as many profit takers and short sellers as possible, gold blasted through to a new high for the year of $1,038. Never mind that the triggering event is complete balderdash, a story in Britain’s Independent newspaper asserting that the Middle East is holding secret global talks to price crude in the yellow metal or other currencies (click here ). It didn’t hurt that Australia cut its interest rates by 0.25%, the first G-20 country to do so. There probably isn’t enough gold in the world to finance more than a few weeks of global oil production. Total gold holdings would only fill two Olympic sized swimming pools. But never let the truth get in the way of a good trade. The confirming moves couldn’t be more ubiquitous, with the Canadian, New Zealand, and Australian dollars all up big, commodities strong, and silver also going ballistic. Regular readers will all recognize these as old friends of mine, core longs that I have been strongly recommending since the beginning of the year. I have been trying to get investors into gold since it was at $800. If you aren’t in gold by now, I can only tear my own clothes and flagellate myself for my abject failure to convince you of gold’s merits. US government debt is exploding, and with foreigners holding a large part of our paper, the only way to get out of this mess is to devalue the dollar. It’s like Obama invited China’s president Hu Jintao to dinner at an expensive Upper East Side restaurant, fakes a sudden case of food poisoning, leaving him with a big fat bill. Next stop $1,200, then $1,500, then the old inflation adjusted high of $2,400. If you want me to help you get set up to trade futures in any of this stuff, please email me at madhedgefundtrader@yah... If you want to know where to buy physical gold and silver in size, or coins with the tightest spreads over spot, check with the experts at millenniummetals.net by clicking here.

Oct 07 01:39 PM

[SPOTS:]

Gold has been in a bull market for 9 years. If it wasn't an article in Investor, it would have been something else that eventually set the record.

Oct 07 05:22 PM

[Zmartmoney:]

What really happened is that there are only so many times and ways for the Central Bankers in US and EURO to stymie the rise. They could try to hammer it again, but there is a losing battle there, as investors make sure they have some in their nest for winter.

Oct 07 06:45 PM

[dmintman:]

Interesting. Experts? copyright 2007-2009. Hope you are getting the vig!


On Oct 07 01:39 PM Mad Hedge Fund Trader wrote:

> tre Of course you knew it was going to happen like this. After churning
> around just below the old high, and sucking in as many profit takers
> and short sellers as possible, gold blasted through to a new high
> for the year of $1,038. Never mind that the triggering event is complete
> balderdash, a story in Britain’s Independent newspaper asserting
> that the Middle East is holding secret global talks to price crude
> in the yellow metal or other currencies (click here ). It didn’t
> hurt that Australia cut its interest rates by 0.25%, the first G-20
> country to do so. There probably isn’t enough gold in the world to
> finance more than a few weeks of global oil production. Total gold
> holdings would only fill two Olympic sized swimming pools. But never
> let the truth get in the way of a good trade. The confirming moves
> couldn’t be more ubiquitous, with the Canadian, New Zealand, and
> Australian dollars all up big, commodities strong, and silver also
> going ballistic. Regular readers will all recognize these as old
> friends of mine, core longs that I have been strongly recommending
> since the beginning of the year. I have been trying to get investors
> into gold since it was at $800. If you aren’t in gold by now, I can
> only tear my own clothes and flagellate myself for my abject failure
> to convince you of gold’s merits. US government debt is exploding,
> and with foreigners holding a large part of our paper, the only way
> to get out of this mess is to devalue the dollar. It’s like Obama
> invited China’s president Hu Jintao to dinner at an expensive Upper
> East Side restaurant, fakes a sudden case of food poisoning, leaving
> him with a big fat bill. Next stop $1,200, then $1,500, then the
> old inflation adjusted high of $2,400. If you want me to help you
> get set up to trade futures in any of this stuff, please email me
> at madhedgefundtrader@yah... If you want to know where to buy physical
> gold and silver in size, or coins with the tightest spreads over
> spot, check with the experts at millenniummetals.net by clicking
> here.

Oct 07 08:50 PM

[MoneyTalk1:]

Inevitable is deflation. People will sell everything, including Gold, to pay off debt.


On Oct 07 12:33 PM twitee wrote:

> This is only the beginning of the Gold investment. There are many
> investors still in denial of the inevitable.

Oct 07 09:00 PM

[rick12345:]

the deficit will not be monetized as many people are expecting, nor will the usd fall to 50 cents. i suspect the consumer, rather than corporations, will pick up the tab some time in the near the future.

Oct 07 09:40 PM

[Dion134:]

Didn't they do that already? The one's buying gold now are not in debt. Nothing left to sell for those who are in debt, not to mention the toxic assets on the bank' s books need to be inflated to make them viable and credit giving again.
A non-interventionist government and central bank would mean deflation, but that's not the case here. Either the government default's or a devalue of the dollar is in the cards. No choice but to devalue. Will it happen overnight is the question?


On Oct 07 09:00 PM MoneyTalk1 wrote:

> Inevitable is deflation. People will sell everything, including Gold,
> to pay off debt.

Oct 07 09:58 PM

[Bill S. Friend:]

OK, Once again heres the debt $17,500,000,000,000. The consumer cannot pay the tab. Nobody can. It cannot be paid in your childrens lifetime, or your grandchildrens lifetime. The dollar must be devalued or we are toast. Make the trades you need to protect yourself from a falling dollar ummmkay??


On Oct 07 09:40 PM rick12345 wrote:

> the deficit will not be monetized as many people are expecting, nor
> will the usd fall to 50 cents. i suspect the consumer, rather than
> corporations, will pick up the tab some time in the near the future.

Oct 07 11:57 PM

[Slvrizgold:]

Moneytalk says that deflation in inevitable because people will sell off everything (including gold) to settle debt. HAHAHAHA!!! This delusional person thinks people that own a lot of gold have debt!!! ROFLMAO!!! I own a whole lot and I don't owe anyone anything!!! I suspect most major gold holders are in the same lifeboat with me.

Here's is the REALITY: Gold represents the PUREST and BEST form of MONEY. In deflation, MONEY becomes more valuable. I will leave the rest for you to extrapolate.

As for GLD, I implore you to sell it immediately and purchase bullion or even better, invest in a great gold miner with a good balance sheet and growth profile and watch the magic of leverage and compounding work on your portfolio. I also think at these prices SILVER is an even BETTER BUY!!!

Oct 08 12:12 AM

[Mr. Ed, Jr.:]

The gold would be the last thing to go.

But, after selling eveything else, there would be no reason to sell the gold. And what would someone sell their last remaining asset for-- US dollars ?


On Oct 07 09:00 PM MoneyTalk1 wrote:

> Inevitable is deflation. People will sell everything, including Gold,
> to pay off debt.

Oct 08 04:17 AM

[CC_Gold:]

Slvrizgold hit the nail on the head with SILVER and GLD. The current Gold to Silver ratio stands at 59. Look for that number to drop to 30 to 40. If Gold reaches 2,000, then Silver will be 50 or more. The price of Gold is going to grow extremely volatile with 100 dollar points swings daily. If you own GLD, be prepared to get burned because most of the paper Gold is held as derivatives and is leased out on the Comex and LBMA. Also, wait until the bullion banks are forced to cover their naked short positions. Can you say 10% premium plus a possible force majeure?

Oct 08 07:36 AM