"When the people find that they can vote themselves money, that will herald the end of the republic". --Benjamin Franklin.
As we put the Presidential re-election behind us, the final outcome has put into perspective a much clearer picture regarding the price of gold in the foreseeable future. That means the current monetary policies are going to remain the same. With the election over, investors can focus on other issues, such as the so-called "Fiscal-cliff", a combination of tax hikes and spending cuts that will come into effect on Jan. 1, unless politicians reach a budget deal by December 31, 2012.
With the "Fiscal-cliff" approaching fast, we could see a new and fresh level of demand pouring money into precious metals in anticipation of the inevitable. There is no other way for the U.S. government to get out of debt but to continue to print endless amounts of money and simultaneously debase the U.S. dollar as a consequence. A devastating prospect when you look back and see that the U.S. dollar has already lost 98% of its purchasing power since 1971.
As the "Fiscal-cliff" debate will continue to be a factor for the price of gold, the eurozone crisis remains a major economic global concern as well. The U.S. economic situation has become more of a political issue near term. The issue is whether politicians can reach a temporary agreement at this late hour. The eurozone crisis is a much deeper problem that could affect the global economic balance and potentially put the global economy back into a recession. This could trigger panic buying in the gold market that could cause hyperbolic moves in the yellow metal over a short period of time.
Moving forward with certainty regarding the current administration's economic policies, we can come to the conclusion that they will be similar to the last four years, and much higher gold prices seem to be inevitable. As more people realize the implications of the policies the current administration has implemented, it can only lead to a more volatile environment where demand for the yellow metal becomes more accepted as a defensive strategy to protect and preserve wealth and purchasing power.
On November 5, 2012, the low in gold was made at $1,672.5 per ounce. We have rallied since to close at $1,730, a gain of more than $57 dollars in 4 days! With the price finding major physical buying support near the 200 MA of $1,671.26 per ounce, it proved to be very encouraging for the bulls. The market is signaling that it has discounted the re-election results and has gone back to doing business as usual.
Let's take a look at the gold and silver charts and see what the technical picture looks like over the short-term.
The December (Comex) electronic gold contract closed at 1730.4. The 52 week Range is: 1535 - 1815. The market closing above the daily 9 and 18 day MA's on a weekly basis is confirmation the short to intermediate trend momentum is bullish. With the market closing below the VC Weekly Price Momentum Indicator of 1732, thisconfirms the price momentum is bearish. Look to take some profits if long as we reach the 1738 and 1745 levels early next week. If stops are taken out here, we could see a rally up to the 1755 and 1777 weekly resistance levels.
Buy corrections at the 1725 and 1720 levels to cover shorts and go long on a weekly reversal stop. If long, use the 1720 level as a SCO/GTC ( Stop Close Only and Good Till Cancelled order).
The December (Comex) electronic silver contract closed at 32.599. The 52 week Range is: 26.215 - 37.65. The market closing above the daily 9 and 18 day MA's on a weekly basis is confirmation the short to intermediate trend momentum is bullish. With the market closing above the VC Weekly Price Momentum Indicator of 32.48, this confirms the price momentum is bullish. Look to take some profits if long as we reach the 32.90 and 33.20 levels early next week. If stops are taken out here, we could see a rally up to the 33.40 and 34.20 weekly resistance levels.
Buy corrections at the 32.18 to 31.76 levels to cover shorts and go long on a weekly reversal stop. If long, use the 31.76 level as a SCO/GTC ( Stop Close Only and Good Till Cancelled order).
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Additional disclosure: TRADING DERIVATIVES, FINANCIAL INSTRUMENTS AND PRECIOUS METALS INVOLVES SIGNIFICANT RISK OF LOSS AND IS NOT SUITABLE FOR EVERYONE. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.