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On Wednesday gold broke out from a 10-week long box or rectangular
consolidation pattern to commence its next major upleg. Fundamentally this coincided with noises emanating from the US to the effect that it
is recognized that there is
no alternative but to continue with QE. Denials later in the day caused the broad stockmarket to lose much of its gains, but the fact is that there
is no alternative to QE, except
a global systemic economic
implosion, and thus, there
is no alternative to QE, although
attempts may be made to disguise the extent of it.
On our 6-month chart we can see
gold's breakout and how, after 7 days of gains, it is starting
to become overbought. However, apart from brief pauses to partially unwind the overbought condition, it is expected to continue to advance strongly in coming weeks and months, overbought or not, and this positive outlook is reinforced by the strongly bullish picture for silver and Precious Metals stocks.
There has been talk
in some quarters about
gold "being in a bubble",
but our long-term chart for gold going back to before the start of the bullmarket, shows that such an assertion is ridulous - gold has been in a steady
uptrend as it has moved simply to compensate for the destruction of the purchasing
power of fiat. What we
are seeing here is real money, which gold is, standing out in an ocean if
increasingly worthless
fiat. Since gold has not been in a bubble and has not attracted
the attention of speculators to any
great degree it can be
said to have an almost
full tank of "bubble power", and if, in
addition to its continued
rise to compensate for
the relentless attacks on
fiat by central bankers and politicians,
it does attract the attention of the investing
public at large, its rate
of rise could very easily accelerate
rapidly and it could go into an ascending parabolic arc. This development is actually viewed as inevitable as we move ever closer to the fiat endgame of hyperinflation, but as we
can see on the chart, it hasn't
even started yet.
Speaking of gas in the tank, the last COT chart
showed a setup similar to
that which existed back at the start of February - before a $260 runup in the price of gold - so the impications of this chart are obvious.
We are going to end this Gold Market update by briefly summarizing the "global playbook"
- once you grasp what is set out below you will
understand why the continued advance in the prices of gold and silver are inevitable, and why their rate of advance is set to accelerate...
There is no way of resolving the Global Debt Crisis in a direct and honest manner - any attempt to tackle it head on would
result in a global economic
implosion and deep depression
- and very possibly a
state of total anarchy. The "de facto" decision has already been taken to inflate it away. While
this will ultimately result in
hyperinflation and possibly depression
anyway, the transition to that
state will be a lot smoother by taking the inflationary approach than it would
be by taking the draconian root and branch approach. There will still be
small to medium size defaults such
as Greece, then Portugal,
and after that probably Spain and Italy, but what will happen
in each of these cases as
they arise is that imminent default will be headed off at the last minute by them being bailed out and propped up, and whatever money is needed to patch things up and keep the system limping along will be forthcoming.
In the United States, after much
ritual wrangling, the debt ceiling will be raised
- again and again and again, and the Fed will
continue to backstop the Treasury
market, and there will be QE3, QE4, QE5 and on
and on, even if disguised
under other names, and money will be manufactured in ever increasing quantities to keep eveything pumped up. For an investor it is
crucially important to grasp
what this means - it means
that every default scare
of this kind that spooks the markets will present another buying opportunity, as just happened with Greece, especially in commodities and
in particular in gold and silver.
A country such as Portugal will
verge on default, bankers and politicians
will run around like headless
chickens for a few weeks,
markets will drop, then suddenly - hey presto -
the necessary funds to
"kick the can down the road" yet again will
be forthcoming and markets will breathe a sigh of relief and rally - and inflation will
continue to build as the debt
bill is pushed ever more onto the populace. The middle and lower classes of the world have been targeted
to pay down the debts through ever increasing inflation that will reduce most
to a state of penury. The good news is that if you
understand the game THAT
DOES NOT HAVE TO INCLUDE YOU.
The continuing debasement of fiat currencies around the world means that the bullmarkets in gold and silver
are set to continue and to accelerate. Up until now both
gold and silver having
been moving higher in
large part simply to compensate
for the destruction of the purchasing power of fiat
caused by inflation, but there
is going to come a point when IN ADDITION to these
important drivers, speculative interest
in both metals is going to ramp
up, as speculators are increasingly
attracted to both metals simply because their prices continue to rise, with no prospect of them ceasing to do so. In addition there will be
an ever increasing flow
of funds into the Precious Metals by those desperate just to preserve their purchasing power in the
face of the demise of fiat. This increasing influx of funds both from desperate
investors and from speculators will eventually power the acclerating
ramp in both gold and silver.
While it
is true that China and Europe have been playing
a dangerous game of chicken in recent weeks by raising interest rates, it is presumed that
they will wake up soon and "come on side" and fully partake in the money pumping game, because if they don't the dollar will collapse relative to their
currencies and their own economies will implode.
Clive Maund
Trading the precious metals and Energy
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