The Gold Universe
Commodities / Gold and Silver 2011 May 10, 2011 - 08:47 AM GMTBy: Brian_Bloom
In summary, I don't get a feeling of comfort from the charts in the gold universe. There are subtleties which fly in the face of conventional wisdom.
From a conventional perspective:
The $XAU looks like it’s bouncing up from here whilst Point and Figure chart shows that $XAU may actually have bottomed (for this move)
The technical situation looks similar for the gold price itself with $1616 as the next long term upside target
Further, the ratio of $XAU to $Gold on the P&F chart seems also to have bottomed
From a trading perspective, the gold universe seems to be a "buy".
BUT!
From a broader perspective:
When I look at the longer terms charts I get this eerie feeling that a US$1616 gold price (if it gets there) may be a top.
Below is a chart showing percentage movements of the gold price since 2000. This is a LOG scale chart (on the X axis) - which implies that growth is being charted geometrically. Note the upward curve of the trend line. This looks suspiciously to me like an exponential blow-off in the making.
Charts courtesy Stockcharts.com
But when you look at the same chart construction of the $XAU you see that in the same period that gold has risen 450% gold shares have risen only 240%. i.e No blow-off.
When you look at the same chart construction for the $CRB you see an index that has only risen by 80% since 2000.
The most logical explanation for all of this is that there has been accumulation of gold itself by people/institutions/governments with DEEP pockets (spare dollars) even as the shares (which should have been running ahead of the gold price because of leverage) have failed to keep pace - and also even as the prices of commodities have failed to keep pace by a VERY significant margin. It follows that the rise in the gold price has been more of a currency play against the US Dollar specifically than a panic into alternative assets.
I'm not able to get a similarly constructed chart for the gold price in Australian Dollars but I looked it up and the price rose from A$500 in 2000 to A$1400 today (180% rise)
In British Pounds the price rose from GBP200 to GBP900 = 350% rise
In JY it went from 30,000 to 120,000 = 300% rise
In Euro it went from EU300 to EU1050 = 250% rise
All this implies that the rise in the US dollar price of gold has not been a "fiat" currency play so much as a world currency realignment play with gold gaining a place at the table and the US dollar losing its relative importance even as it retains a place at the table.
The question is: Will the US$Gold Price explode upwards to mirror a US$ index collapse? In turn, this begs the question as to what will happen to the world economy if the US Dollar collapses?
My logic tells me that if the US$ collapses the world economy will tank. There are too many greenbacks and dollar denominated computer credit entries floating around for the US dollar to be allowed to collapse in a heap. The foreign exchange reserves of too many countries will be savaged. From a different perspective, if the $Gold price blows off then statistical evidence suggests this will be the forerunner of a systemic collapse - ie AFTER blowing off, the DOLLAR price of gold will collapse
It follows, therefore, that if the world economy is to survive intact, the US dollar cannot be allowed to collapse. "Something" (not currently visible) will have to emerge to head this possibility off at the pass.
In my forthcoming novel, The Last Finesse, I put forward one possible development - which will also serve to facilitate a PAYMENT of the US Public debt (Currently $14.3 trillion) - i.e. a non default scenario. It may take upwards of ten years to arrange, but it is conceivably possible.
The manuscript of this factional novel is complete and is currently being edited prior to being made available on the world markets - initially in e-book format. If you or any of your associates are interested in acquiring a copy, please email me at the above address and I will put your details on a (confidential) database for later contact when the book is published.
By Brian Bloom
Once in a while a book comes along that ‘nails’ the issues of our times. Brian Bloom has demonstrated an uncanny ability to predict world events, sometimes even before they are on the media radar. First he predicted the world financial crisis and its timing, then the increasing controversies regarding the causes of climate change. Next will be a dawning understanding that humanity must embrace radically new thought paradigms with regard to energy, or face extinction.
Via the medium of its lighthearted and entertaining storyline, Beyond Neanderthal highlights the common links between Christianity, Judaism, Islam, Hinduism and Taoism and draws attention to an alternative energy source known to the Ancients. How was this common knowledge lost? Have ego and testosterone befuddled our thought processes? The Muslim population is now approaching 1.6 billion across the planet. The clash of civilizations between Judeo-Christians and Muslims is heightening. Is there a peaceful way to diffuse this situation or will ego and testosterone get in the way of that too? Beyond Neanderthal makes the case for a possible way forward on both the energy and the clash of civilizations fronts.
Copies of Beyond Neanderthal may be ordered via www.beyondneanderthal.com or from Amazon
Copyright © 2011 Brian Bloom - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.
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