closed on Friday at $764, another 27-year high. It's the highest weekly close
for gold since January 18, 1980. Gold closed that week at $812.00. The next
day gold made its all-time record high close of $825.50, and then fell
sharply - marking the end of the 1960-70's great bull market. Gold never
again closed in the $800s.
is rapidly approaching the $800s and that $825.50 high. Could it collapse
again after reaching that price?
of course is possible when it comes to markets, but our task is to focus on
probabilities rather than possibilities. It is highly unlikely that gold is
about to start another bear market. I put the probability about 1%.
are just too many factors pushing gold higher, and perhaps most importantly
of all, gold remains cheap. It is one of the few commodities that has not yet
made a new record high.
the $825.50 previous peak in gold may appear intimidating, we have to
recognize that price was recorded in 1980-dollars, which had 1980-purchasing
power. There have been 27 years of inflation since then. Adjusting for the
loss of dollar purchasing power over those 27 years, gold today would need to
reach $2,206 - and counting.
the "and counting" comment because the dollar is being inflated
every day the Federal Reserve and the banks create more dollars than are
demanded for trade and commerce. So if gold were to reach that $2,206 level
at some future date, adjusting between now and then for future inflation, an
even higher price will be needed to match that 1980 peak.
see from the above charts the different results between silver and gold. Gold
has broken above its May 2006 high, but silver is still trading below it.
This non-confirmation is not a reason for worry, but it does represent
something we should be watching carefully. When silver finally breaks above
$14.85, both precious metals will have resumed their major uptrends.
the US Dollar Index closed the week at another record low.
support for the dollar existed at the 78.50-80.50 level (marked by the red
dotted lines on the above chart) now becomes overhead resistance. So if the
dollar bounces from here, it's not likely to bounce too high. New selling
will keep the dollar under pressure.
James Turk is the founder
of GoldMoney (www.goldmoney.com) and the co-author of The Coming Collapse of
the Dollar (www.dollarcollapse.com). Copyright ©
2007 by James Turk. All rights reserved.
Copyright © 2008. All rights reserved.
Edited by James Turk, firstname.lastname@example.org
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