Expect Gold to Regain its Strength Both Short and Long Term

Includes: GGN, GLD, IAU
by: Yaser Anwar

After the CPI released earlier this month showed more inflationary pressures on the U.S. economy, there is no doubt in anyone's mind that the Fed will raise rates for the 17th consecutive time at its upcoming meeting.

How far will the Fed go in their rate hikes? Some economists fear that if the monthly reports keep coming in showing inflationary pressures, the Fed will get overzealous, perhaps raising 50 base points in one hike instead of the normal 25, and end up doing more harm than good - forcing the United States into a recession, in other words.

According to CNN Money:

"Some economists say rising energy prices are bleeding through to affect the broader economy. Others point to the rise in housing prices during the recent real estate boom. Some even say that due to a quirk in how the government measures housing prices, a weaker real estate market can actually make inflation seem higher."

Watching the price of gold.

This correction has surely scared some of the speculators off, and it's time to get your hands on the yellow metal. Take advantage of this low price before investors start taking these inflation concerns seriously, and flock to gold as a hedge.

From Colin Twiggs at Incredible Charts:

Spot gold formed a small flag below resistance at $600, signaling continuation of the down-trend.

Medium Term - Expect another test of primary support at $535/$540 if the index fails to break above $600 in the next few days. A stronger dollar will mean that gold is likely to weaken, and vice versa.

Long Term - The gold-oil ratio is below 9. Up-turns below 10 signal buying opportunities while down-turns above 20 indicate selling opportunities. Expect a recovery if crude prices remain high.

[Editor's note: ETFs covering the gold market include (NYSEMKT:GGN), (NYSEARCA:GLD) and (NYSEARCA:IAU).]