Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Why Most Investors LOST Money by Investing in ARK FUNDS - 27th Jan 22
The “play-to-earn” trend taking the crypto world by storm - 27th Jan 22
Quantum AI Stocks Investing Priority - 26th Jan 22
Is Everyone Going To Be Right About This Stocks Bear Market?- 26th Jan 22
Stock Market Glass Half Empty or Half Full? - 26th Jan 22
Stock Market Quoted As Saying 'The Reports Of My Demise Are Greatly Exaggerated' - 26th Jan 22
The Synthetic Dividend Option To Generate Profits - 26th Jan 22
The Beginner's Guide to Credit Repair - 26th Jan 22
AI Tech Stocks State Going into the CRASH and Capitalising on the Metaverse - 25th Jan 22
Stock Market Relief Rally, Maybe? - 25th Jan 22
Why Gold’s Latest Rally Is Nothing to Get Excited About - 25th Jan 22
Gold Slides and Rebounds in 2022 - 25th Jan 22
Gold; a stellar picture - 25th Jan 22
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold Odysseus Journey Continues!

Commodities / Gold and Silver 2012 Feb 08, 2012 - 02:31 AM GMT

By: UnpuncturedCycle

Commodities

Diamond Rated - Best Financial Markets Analysis ArticleGold is the Odysseus of the markets, destined to wonder the hinterland of the financial world for years without achieving the deserved safe haven status. Like Odysseus gold will eventually arrive and the general population will embrace it for what it is, the one and only store of wealth that exists today. Loathed and assailed by the mainstream press, gold is deliberately kept hidden in the financial shadows by those that continue to shovel out paper “assets” like so much manure. Right now the Dow is all the rage with the press as they preach the gospel of the US stock market as a port in the storm. They do so with an old time religious fervor that would make a snake oil salesman blush. The object of the message is to pry that last penny from the hands of the last widow and orphan left standing. Value be damned! There is always a greater fool out there who will want your paper asset at some higher price.


No one cares to discuss the reality of the situation. If you bought the Dow five years ago you would have paid 12,500 as you can see here:


Yesterday the Dow closed at 12,845 so you would have gained 2% for your troubles. By the same token if you had purchased gold five years ago you would have paid US $660.00 as you can see below:


Yesterday spot gold closed at 1,723.00 so you would have gained 160%. If you want to go back ten years, it gets worse. The Dow would have risen 32% versus gold that’s up more that 350% for that same time period. In fact you can compare gold against almost anything (that can be found in a liquid market) and at best all the rest come in a distance second.

So why is gold almost universally despised by politicians, central banks and money managers? Simply put it’s the one thing that can’t be legislated into existence or created by the touch of a keyboard. Gold implies discipline and that’s something that a politician or a central banker cannot tolerate under any circumstances. Financial discipline, the ability to live within your means, is something that’s been in very short supply for the past four decades. In fact unless you are a child of the Great Depression, and there are very few left, you don’t even understand the concept of discipline. Why buy gold when you can simply print another dollar and it is accepted anywhere you go?

I guess on the surface that might not seem so bad, but when you start to dig down a little bit it looses it luster. Take a look below at what’s happened to the US dollar compared to a basket of its competitors over the last ten years (dashed horizontal red line) and you’ll see what I mean:


It’s fallen from 121 to 79, meaning that it lost 35% of its value in real terms! Remember that 32% gain in the Dow for the last ten years? Well folks it’s really a three percent loss since stocks are denominated in US dollars!

That’s all well and good and I suppose I could go on to tell you how demand continues to outpace production, that central banks are printing fiat money at an increased rate, or that central banks are now net buyers of gold, or how countries like China and India and now buying production straight from the mine making it more and more difficult for the paper gold market (futures) to meet its obligations, the coming derivatives implosion and so on… but you’ve heard all of that before. Instead I want to talk to you about the coming external shock that will highlight this new third phase of our gold bull market.

The shock will originate in the Middle East but it will resonate around the world for quite some time. Egypt is experiencing a new wave of social unrest as recent promises are forgotten, Syria is undergoing a wave of brutal repression and Iran continues to develop its nuclear capabilities for whatever means. On the one hand you have Israel and a somewhat reluctant US while on the other hand you have Iran, Syria, Egypt, a hand full of factions in several other countries like Iraq, and they are all backed by Russia and China. Why would they risk war? They don’t want any more Middle Eastern oil falling into American hands!

All major industrialized nations are still dependent on fossil fuels and that includes Russia and China. They don’t relish the idea of having to go with their hat in their hand to the US and ask for oil. Then you have Israel hell bent on attacking Iran and dragging the US along for good measure. Yesterday the US implemented a second wave of sanctions against Iran in the hopes of staving off an attack, but I think the handwriting is on the wall. The attack, when it occurs, will bring about retaliation from China and Russia. Once that occurs you’re just a heartbeat away from “out of control”. Given the complete lack of leadership in the US, you can see the potential for disaster.

I believe gold is sensing all of this and that is another factor as to why any reaction at this point and time will be short lived. As you can see in this nine-month chart gold broke out

to the upside two weeks ago, and in spite of a two-day reaction the uptrend remains intact. Gold did make a lower low this morning at 1,709.30, just above decent support at 1,704.50, and has recently moved higher. It is currently trading at 1,732.40 and I would not be surprised if we saw the bottom of the reaction earlier this morning. I’ve drawn in two support lines (black horizontal dashed lines) and the lower one at 1665.00 should hold under any circumstance. Resistance will come at the old lower highs of 1,767.10 and then again at 1,804.40.

General market conditions are enough to drive the price of gold higher and that is reflected in this Point & Figure chart:


So just on price action alone gold can go to 1,930.00, but I believe that we’re going to get a lot more upward pressure than anyone thought possible and that will drive gold much higher than anyone imagined. Once the big boys start throwing darts at each other all sorts of unintended consequences will occur. Gold is unique in that it can be subject to both greed and fear at the same time, and that will prove to be a significant driver.

Watch both the dollar and gold, as they will act as canaries in the coal mine and start to move fast and hard in opposite directions as those in the know protect them selves. I have been recommending to my clients the purchase of both gold and silver since late December, and human nature being what it is they have been slow to react (just like the rest of the investing world). If its possible to recommend gold and silver even more, I do so today. I bought as close to the low today, at 1,708.00, as I could and I will buy a breakout to a higher high once it occurs. Both are going much higher and I expect to see the 1,930.00 target hit by late spring. Gold is going to 4,500.00 by late 2014 and that’s good enough for me. Silver will go to a minimum of 165.00 and could go much higher. Those who buy today probably will not remember the moment, but those who don’t buy will live to regret it.

Giuseppe L. Borrelli
www.unpuncturedcycle.com
theunpuncturedcycle@gmail.com

Copyright © 2012 Giuseppe L. Borrelli

- 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.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Luis de Agustin
18 Feb 12, 09:59
Stocks dullish. Gold bullish.

Continuing published research by David Ranson, head of research for Wainwright Economomics would support the article.

As a result of the US equity market’s January performance, Wainwright now calculates that the market is well on the way to retrieving lost ground from its sell off in the third quarter of last year; however, there are only a few percentage points of short-term upside left for stocks, and significant downside given the general level of instability in the markets for sovereign debt and currencies.

Going forward, Wainwright sees a flat stock market – until there is some major change in government policy perhaps as a result of the coming elections. High-yield debt is likely to underperform the stock market – except, perhaps, for the lowest grades.

The upward trend in the price of gold remains undiminished by its recent weakness, and Dr. Ranson expects further gains in 2012. Ranson believes it is driven primarily by the rapid rate at which federal debt held by the public is rising – four times as rapidly as the economy.

That's the real deal.

Luis de Agustin


Post Comment

Only logged in users are allowed to post comments. Register/ Log in