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The rise in the gold price has continued and shown a break up above the trend line. This has always
been a sign that the
gold, silver prices have
‘spiked’. This has always
been a signal to be ready
to take profits and be ready to go back in lower down.
This was a correct approach and we do not argue with the logic; however, a change is happening in precious metal markets. Over the last
few weeks gold has run ahead but it has seen brief and shallow corrections until this last week when traders and speculators caused a ‘spike’ to $1.910, before
an equally dramatic fall back to $1,716. This is
not the sort of correction we are discussing here. The speed and extent
of the correction did not reflect
the market fundamentals.
So we must ask, “Are the current buyers also potential sellers?” In developed markets, the concept that an investor will not take a profit once his target price
is reached seems ridiculous because it is
believed that all buyers will be sellers
when they have a good
profit. But in the changed gold market
of today buyers are not often sellers, as we know it.
Does the Developed World Still Dominate Gold Prices?
The ongoing uncertainty in the developed world, the lack of political leadership over financial
matters –Angela Merkel
telling all that governments should not be told what
to do by markets, still—and
overwhelming debt in the
face of further economic downturns, points to demand for
gold coming from the developed world; however, gold demand is lackluster
there, at best.
Developed world investors are asking
themselves…
v Will the developed world debt
and distress factors pushing gold higher be put right?
v Are these the factors
that are pushing gold higher?
v Are the gold and silver price
rises just about the developed world and its problems?
v Has gold seen its
top?
By past measures the gold price looks as though it should have a deep correction. The same was said when
gold hit $500 after rising
from $300 too.
There has never been a more important time to
understand both the gold
and silver markets. Those who followed
our Alert bought gold at $1,555 and are still holding gold. The table to the left
is the most definitive piece of evidence describing what is happening in the global
gold markets.
Gold
Goes Global
Gold went really
global around five years ago. In 2009 central banks came in as buyers. These two factors
have changed the gold market
entirely; they have distorted the factors bearing on technical analysis and changed the way prices move now. In fact, the very nature of investors in
gold has changed, and for good!
Of course the market looks as though it needs a major correction, if
you look at it through the eyes of six years ago. If you believe
the picture painted by
the old criteria, you should sell
gold and stay out until it drops back, but to where?
If you understand the new investors and how they think, then your
conclusions should be different. Look at what has happened since June and note that while the risks in the gold market have risen, current buyers are not price chasers either. This fact alone should
make you ask,
Are they likely to be sellers because of a swift rise?
What we have seen is a failure to follow prices up, but to wait until they
pull back and for physical gold to be on offer. The new investor wants physical gold itself and is not so concerned
with price. If they are right, sooner or later the price will rise to well above what
they have paid. The lifespan of their investment is generations long, not days, weeks, or years long.
The conditions that have lifted gold from $275 to $1,900 continue to persist.
The gold price is not
about gold; it is about
the bear market in currencies, the deteriorating
confidence in the value of currencies, as well as developed world’s government’s
ability to restore that
confidence.
As these factors point to more of the same
–expect a
continuation in the fall of currencies
against gold and silver
to levels deemed incredible by the developed markets of the world.
Do you
expect the value of currencies
to rise? Do you expect a resurgence of economic health in the developed world? Do you expect strong government with the force and
conviction to produce a reformed strong monetary system across a financially united world?
Asian View
of Money
Asia has always had an inherent trust in precious metals; a trust, which has now been validated again and again over the last decade.
Asian investors have never believed that paper money is a solid measure
of value. When they see currencies weaken it is
in line with the nature of governments.
Is there a government whose money has lasted throughout its entire lifetime? When there has been, its money was gold and silver, and such money has lasted throughout most governments in history. Now, has there been a paper money based on a government’s
obligations that has lasted
beyond the life of the government?
It is
this perspective of money that
is critical to understanding
today’s gold and silver markets.
There is a point where confidence in paper money has sunk so low that
a collapse is triggered. Governments will fight tooth-and-nail to prevent that from happening. When it does
happen, it happens as fast as rebels entering Tripoli.
Central bank’s investment in gold
is an insurance policy against such a collapse. People who
have never been lulled into the developed world’s sophisticated monetary systems are not likely to be so, now that
it looks so wobbly. The rise of gold and silver prices is about the fall of paper money.
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