Gold: Something Powerful Is Building

Another nail in the coffin for deflationists. Gold traded at multi-week highs against paper currencies Monday night. Perhaps the most significant move was gold's close above $AUD1180. The charts below suggest that something powerful is building in gold, perhaps something that will rival what we witnessed in the late 1980s. The evidence is there as plain as daylight for all to see, of course whether you choose to believe it or not is entirely up to you.

Now we wait on Crude and the CRB to breakout in Aussie dollar terms. But given what has just happened with Gold (and what is happening with Baltic Freight rates, TIPs vs. US 10yrs we think Crude and the CRB will follow. Watch the CRB and Crude in Aussie Dollar terms. A break above 3.20 and 0.90 in the charts below will be the final nail in the coffin for deflationists.

In religion and politics people's beliefs and convictions are in almost every case gotten at second-hand, and without examination, from authorities who have not themselves examined the questions at issue but have taken them at second-hand from other.

This quote from Mark Twain applies equally to investing and economics as well. We say believe not in what others tell you but in what the market is telling you.

Disclosure: Long Gold in Aussie Dollars, DBC, SLV

Comments

[Mad Hedge F...:]

lga News broke this morning that, out of the blue, the Reserve Bank of India bought 200 metric tonnes of gold from the IMF for a handy $6.8 billion. The news set the gold market on fire, boosting the December futures $40 to an all time high of $1,088. It is the largest transaction in the barbaric relic since the Alaric’s Visigoths sacked Rome in 410 AD. It has been public knowledge for some time that the IMF was looking to unload 403 tonnes of the yellow metal in order to fund lending to poor countries. Many traders say this threatening overhang is why gold failed to definitively break out to the upside this year, despite six attempts. The expectation was that China would take this hoard as part of a broader diversification away from the dollar. Bringing India into the fray, which had no prior history of stockpiling gold, is a whole new plate of basmati rice. Not only does this raise the prospect of a bidding war with China for more gold reserves, other cash rich emerging market central banks are likely to join the mosh pit as well, no doubt panicked by the ominously rising whirr of printing presses in the developed countries. My short term goal for gold was $1,200, but I now have to raise that to the $1,300 favored by some chartists in view of the new dynamics. If you want to see my long term target, take a look at the chart below, which has gold zeroing in on its inflation adjusted all time high of $2,358. For those who prefer holding the barbaric relic of the physical kind, visit the tightest spreads in town on American Eagles and bullion at www.millenniummetals.net/ . And while you’re there, sign up for their free research product on precious metals.

Nov 04 07:04 AM

[Vuke:]

That something is recognition. Recognition by investors, Central Banks, Funds and others that gold is not just another commodity like lead, zinc or iron. And that paper is just that, paper.

As that recognition builds more and more people will want gold. Because of its extreme scarcity (1/2 oz/available per capita) the last buyers may have to wave huge piles of paper to secure any.

Nov 04 07:17 AM

[HATEFEEBAY:]

US government is NOT to be trusted, and I say that as an American. They are destroying the country including the dollar here....

Long JAG and physical silver

Nov 04 08:59 AM

[Roger Knights:]

Gold's rise, I think, is primarily due to a perception of its having less downside risk, making it safer to be long. IOW, it is now believed that Asian central banks will be buying on dips, so the worst that can happen is a sideways trend.

More importantly, there's a growing realization that a fundamental change of psychology has occurred at the highest levels of fiat-holders, namely, a historic re-appreciation of the need for a greater portion of their reserves to be held in hard assets. This is a reversal by the market-movers, in comparison to whom other factors are trivial.

Nov 04 09:10 AM

[talld:]

The hedge funds are buying gold again.

Nov 04 10:45 AM