Gold's Bull Market Due to Supply and Demand Economics

Gold
Gold is trading at $1.056.50/oz. In EUR and GBP terms, gold is trading at €706.82/oz and £655.25/oz respectively. Resistance currently lies at $1,064.10/oz and $1,070/oz with initial support at $1,048.60/oz and then $1,040.70/oz.

There continue to be very strong fundamentals driving the gold market. These fundamentals are driven by basic economics. There is a small finite supply of gold; while there is a very large and growing very significantly supply of government bonds as governments internationally print money and create public debt on a scale never seen before in history. In the battle between the huge supply of government debt versus the small finite supply of gold, there can be only one winner for the

foreseeable future. Until governments (western and the UK and US governments in particular) get their act monetary and fiscal acts together, gold will likely continue to rise in value and this is why the inflation adjusted high of $2,300/oz looks highly likely in the coming years.

The 1980 high was a speculative bubble (after rising 24 times or 2,300% in 9 years) but even if one looks at the average nominal price of gold in 1980 it was $600/oz or some $1,800/oz. This is an important consideration. Until interest rates rise to more reasonable and attractive levels to incentivise savers to hold cash and government bonds, the opportunity cost of holding gold remains nearly nil. This is leading to what is clearly a real bull market in gold - and a bear market in the dollar and other currencies.

Silver Looks Very Good Technically and Soon to Break the $21/oz Mark

Silver
Silver is currently trading at $17.74/oz, €11.88/oz and £11.01/oz. Silver’s resistance lies just above the $17.94/oz mark and support at $17.70/oz and $17.48/oz thereafter.

Platinum Group Metals
Platinum is trading at $1,350/oz and rhodium is trading at $1,750/oz. Palladium is currently trading at $328/oz.

Disclosure: no positions

Comments

[USisCorrupt]

You can have the Paper Gold (GLD) & Silver (SLV) and I will take the REAL thing "PHYSICAL Gold & Silver" and when the US Market's are ALL exposed for what they really are " One Giant Madoff/Ponzie Scheme" lets see who is smiling in the end?

2009 Oct 15 08:58 AM

[LaChic]

having gold and silver "physical" is the way to go, but there is nothing wrong with trading the SLV, GLD and the GDX, smart traders use trailing stops to protect their profits. I personally have Gold on hand in the form of Jewerly/coins, same with Silver.

I do agree this market is nothing but a made up market, driven by the same fake fundamentals that took the market down in 2008, I personally do no believe in this recovery nonsense.

2009 Oct 15 12:40 PM

[Laurence Hunt]

Excellent chart. I'll take that as a roadmap for now.

2009 Oct 15 07:51 PM

[Albertarocks]

Not only is that chart a textbook description of Elliott Wave theory in action, when we consider the incredible number of dollars that have been created out of thin air already (with much more by the government's own admission to be printed in the future), the path of that chart is absolutely inevitable.

The antidote to inflation is in the shares of gold and silver miners. In my lifetime, I've never come across a situation with such a certain outcome.

2009 Oct 15 09:46 PM

[Boxed Merlot]

On Oct 15 09:46 PM Albertarocks wrote:

> ...when we consider the incredible number of dollars that
> have been created out of thin air already (with much more by the
> government's own admission to be printed in the future), the path
> of that chart is absolutely inevitable.


I can already hear it. We will be told the rise in gold is because the $3.45T sitting in money market accounts is bidding the price up.

2009 Oct 16 09:38 AM