Monday, February 15, 2010

A new trend begins – Watch for confirmation of the breakout in gold

Gold Hits New Euro Record, Stock & Dollar Correlation "Still High", as Spain Joins Greece in Attacking "Speculators"

Gold, as I mentioned a few weeks back, is forming a massive cup and handle formation, confirming its breakout above $1000/ounce. It is now firmly on the way up again, and, the market is voting its verdict against the Euro, with money flooding into the Dollar. This is reminiscent of the period surrounding the world wars, when money see sawed between Europe and America, fleeing uncertainty. The trend is interesting, because, whilst some money is going into dollars, gold is rising against all currencies, signaling a systematic failure of fiat currencies. Spain and Greece are blaming speculators, but, whilst they are indeed drunk, who gave them the liquor? Central banks, flooding the market with liquidity and low rates plus governments legalizing fraudulent use of derivatives are at fault.

Posted by freemanphil @ 09:54 PM (1876 views)
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20 thoughts on “A new trend begins – Watch for confirmation of the breakout in gold

  • “Central banks, flooding the market with liquidity” Wrong, central banks are now withdrawing liquidity.
    Short-term I suspect gold is heading down for the bottom of this channel, $950 at the very least. But long term I agree with the bullish view.

    http://www.chartoftheday.com/20100212.htm?T

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  • little professor says:

    Hmmm… so, Bullionvault say gold prices are going to the moon. In other news, Rightmove say house prices will only ever go up, and turkeys say Christmas is a Bad Thing.

    Leaving aside the hype-machine, let’s just look at the actual data, shall we? This is the gold price over the last quarter. (Graph taken from Bullionvault themselves, before the conspiranerds start making accusations of fiddling):

    Doesn’t really look that impressive to me. Not sure what you are slavering about

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  • Regarding the fraudulent use of derivatives, this requires additional explanation. A derivative is a promise to pay. It should therefore be entered as a liability on the balance sheet and should never be used as collateral. It should be viewed in terms of the opportunity cost, because, instead of purchasing a derivative, one could have purchased a real asset. Derivative contracts, like profit, should never be counted as assets until realized. To do otherwise is fraudulent, and, carried out systematically, this fraud misallocates wealth and causes poor investment decisions. Done systematically, it distorts the market. The derivatives give entrepreneurs a false signal that people are saving for future investment, so they set up more businesses than the economy can sustain, so, when interest rates go up, businesses go bust, in an economic game of musical chairs, because, whilst people are running around the chairs, the misallocation of wealth is destroying capital, so, when the music finally stops, only some of the participants can sit down.

    The Cultural and Spiritual Legacy of Fiat Inflation

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  • “Short-term I suspect gold is heading down for the bottom of this channel, $950 at the very least. But long term I agree with the bullish view.”

    I think it very likely that gold will test $1000/ounce and find new support there, confirming the breakout, but, it will only get that far down if capital flees Europe (until of course capital realizes that California and friends are in as much strife and bigger than the PIGS). So, whilst gold may fall short term in dollars, it may well soar in Euro and Sterling.

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  • Unless you are a day trader, follow the trend. The markets are rigged.

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  • Went to an interesting talk last week by Robert Prechter – the guy behind Elliott Wave.COM

    He is convinced about the second downward leg coming up and that in fact, going into commodities is not going to help as everything is more or less harmonised. Although I don’t get the whole Elliott Wave thing, I do understand where he is coming from and I will be steering clear of gold as it is surely going to hit the buffers again when hedge funds sell their stakes to cover their losses elsewhere. I believe USD cash is king.

    Painful times ahead.

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  • respect to wonderpup who has just posted this on the forum…

    Kill The Banks, Save The World?
    Financial cancer out of control?

    Watching the EU slowly unwinding under the pressure of international financial markets begs the question- has Wall street and the City become a clear and present danger to the viability of western civilisation?

    At what point does their accumulation and manipulation of debt obligations become so disruptive to the real world that they require elimination?

    Should both the EU and the US now be turning it’s security apparatus on the masters of universe before they create so much social dislocation that our societies no longer function?

    It just seems more and more obvious that the Financial sector has gone rogue- it no longer operates in the self interest of the majority, but exists now to serve the interests of a small minority only- and is now so out of control that it must be effectively taken out in order to prevent a collapse of the host societies-

    any thoughts?

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  • @mg, thanks for the link but it did nothing for me

    wonderpup on the other hand, nails it.

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  • I have no alternative explanation but I really think people need to seriously consider and ponder before putting any savings into gold. You missed it. Don’t try and jump on the bandwagon now, its too late.
    Think about the losses you might make. Be cautious. This is the time to concentrate on maintaining wealth, not going for gold (ha ha).

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  • 10. stillthinking said.. people need to seriously consider and ponder before putting any savings into gold. You missed it. Don’t try and jump on the bandwagon now, its too late.

    if you decide that holding physical gold is the best store of wealth, can it ever be ‘too late’?

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  • crash n burn – agreed Robert Pretcher has a clear insight on things. Although he is bearish on gold near term I think his longer term view is bullish. Get in when the price is right, and if you have any capital left after the next crunch …

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  • Robert Prechter is always negative on gold. He has been wrong about gold for a very long time now. I prefer Bob Chapman, who has been correct for a very long time. He was the world’s largest gold and silver stocks trader during the 1970’s and once published the world’s most popular financial newsletter: Bob Chapman Youtube Channel

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  • Food for thought, if you lived in a country who’s currency was the euro, there are 16 countries, and the currency had half a chance of collapse would you being reasonably financially astute, buy dollar denominated sterling denominated investments while their central banks are printing it down the toilet, leave it in euro’s to devalue or do what american’s british indian chinese etc have done and hedge against the euro / fiat correction and buy a couple of blocks of gold with your euro’s. 16 countries lot of people with euro savings ?

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  • @devo

    “any thoughts?”

    Your observations about the role of Wall street and the City being a clear and present danger to the viability of western civilisation chime very closely indeed with Jim Sinclair’s views in his recent recent interview on King World News:

    http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2010/2/15_Jim_Sinclair.html
    (Warning: this interview is roughly half an hour long)

    Sinclair doesn’t offer any words of comfort. In his view, the speculators betting against national currencies are beyond the control of national governments and quite happy to trash any country for money. If my recollection is correct, he said that the big currency speculators would “put their mother in a microwave” if the price was right.

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  • Under normal trading conditions gold is more than due a substancial correction due to its massive gains over the past few years but these are not normal trading conditions and a small chance of a systemic collapse of the western financial system is in the mix.
    The US $ is king in normal conditions of stress but again these times are not normal.
    I dont know how bad things may get but a loss of confidence in the US $ is possible and if this happens gold becomes king and the price may go up in hundreds of bucks a day.
    I have gold and to be honest I hope this day never comes but its good insurance just incase.
    Reading the bearish comments in which I agree indicates gold has legs and if the Greece problem isnt sorted out soon gold may blast past $1200 highs like a knife through butter.

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  • A Bear In The Woods says:

    @ Stillthinking (10)

    I have a small amount of gold and got in quite early but the rest of my cash is just in savings accounts (we STR in 2006). I would be interesed in how you best think wealth can be ‘maintained’ in these uncertain times. Like many people I am not financially sophisticated and have therefore been tempted to get back on the housing market if only so that I am in the same boat as everyone else. I guess for many people housing is one of the few ‘assets’ outside savings to which they have access and which they understand (or think they understand)

    It seems to me that the govt will do whatever it can to prevent a housing crash. I also believe that the sellers strike is the main driver behind rising prices. A house in the area where we have been tentatively looking recently had 12 closed bids and went way over the asking price, simply because so little has come on the market in the last 6 months.

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  • Gold is up against ALL currencies overnight. That was a true breakout. I think gold will correct back down to 800 Euro’s again to confirm the breakout, but, we are on the way up. Inflation is definitely out of the bag. I think those Shelter adverts are predictive programming for hyperinflation, where they are preparing us for the time when a chicken will cost £45. You will only be able to eat if you grow your own food or have gold and silver. They will take us to war when this occurs. Expect a strike on Iran, because the establishment know that men become war like when they can’t feed themselves and their family, so, they divert this instinct from the real culprit to a bogey man, to retain power. Resist this all the way and start battling the system with all your might.

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  • Phil,

    I respectfully offer you some words from Jim Sinclair as well – stop poring over charts. Unless you’re a proper trader, all you are doing is wasting emotional energy. Gold could do anything in the next year.

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  • “Robert Prechter is always negative on gold. He has been wrong about gold for a very long time now.” – first part is not right, he was a major bull around $300. Second sentence has more credibility, since he has been very early on calls. In actual fact right now i think he is actually bullish on Gold in Euro terms because he feels that (perhaps after a retracement) the $ will soar against the Euro

    He has been very early on calls because he was wrong on how much assets would be inflated or more accurately how much the debt bubble would inflate .

    “stop poring over charts …unless you’re a proper trader, all you are doing is wasting emotional energy. Gold could do anything in the next year.”

    Even if you do do chart analysis and are a “proper trader” there are only certain times when you can have a call that has a high probability of being right, or what looks to be a good risk / reward punt. And these two arent necessarily the same. IMO this is not one of those times, there are easier markets to look at.

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