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�“The National Budget must be balanced.The Public Debt must be reduced;the arrogance of the authorities must be moderated
and controlled.Payments to foreign governments must
be reduced, if the Nation does not want to go bankrupt.People
must again learn to work, instead of living on public assistance.�” �…..Marcus Tullius
Cicero (+/- 55 BC).
The current correction in
gold started in August 2011 and has now gone on for 112 weeks �– (it most likely bottomed on June
28th).
This has been the longest
correction since the current bull market started in 2002. The correction of
2006 lasted 71 weeks before a new high was reached.There
followed then a 50% price rise, (+85% from bottom to the next top).
The correction of 2008
took 77 weeks before a new high was reached.The
gold price then advanced by 80%, (+325% from bottom to next top).
The expectation is for
gold to advance by more than 50% as in 2006-2008, and more than 80% as in
2008-2011 during this next �‘leg up�’, because of the depth of the current pullback.Because of blatant manipulation of the gold
price by large traders dumping oversized lumps of futures contracts during
hours when trading is usually sparse; the price of gold is starting this next
rally below its normal starting point.This is
likely to cause the price to act in slingshot fashion, and may very well
surprise a lot of people.
The US debt ceiling has
just been pushed upward for the 79thtime since 1960, and right
after the last raise in 2011, the price of gold rose +17% between August 1st
($1620), and August 22nd ($1898) �– that was +17% in just three weeks!A similar reaction by gold
at this time could result in price rising quickly from $1281 to $1498.
Here is the gold chart
that records the beginning of the current bull market, along with three
upside breakouts and the expectation for the next breakout, marked by
arrows.(Charts courtesy www.stockcharts.com unless indicated).
The RSI (at top of chart)
is ready to rise, the CCI (at upper bottom) is rising from oversold
conditions, and the A/C line at the lower bottom is still in uptrend after
merely leveling out.
This chart courtesy
Incrementum.li shows us that the current correction in the gold price is not
unusual, if we accept the principle that the higher the price, the larger the
pullback.
This chart courtesy
Sharelynx.com shows a gap that has opened up between the US debt limit and
the price of gold.Unless we expect the debt limit to
be lowered, (how likely is that), we better prepare our portfolio for a rise
in the price of gold, as the rubber band effect takes hold.
Featured is the daily
gold chart.Price is carving out a rising channel
that is anchored by two upside reversals (June 28th and Oct 15th).On
Oct. 17th price broke out from beneath three months of resistance,
with a target at the 200DMA.The three supporting indicators have all turned
positive, including the Accumulation/Distribution line.The
Gold Direction Indicator (for details www.pdegraaf.com), turned bullish at 55%, compared to 44% on Wednesday.
This chart courtesy
BMGBullion.com shows the US Federal Debt on a per capita basis.This
debt cannot be paid off �– it will be inflated away.Gold and silver
will be sought as protection against this inflation.
This chart courtesy Mark
J. Lundeen shows the number of US dollar bills in
circulation, compared to the number of ounces of gold supposedly stored at
Fort Knox.(These gold ounces have not been audited
since 1953).
Here is the long-term
chart for silver, along with the breakout points after a correction takes
place, marked with arrows, including the expectation for the next breakout.The three supporting indicators are beginning to
rise up from support levels.
Featured is the index
that compares silver to gold.Since the second leg
in the double bottoms of 2003 and 2008, the trend has favored silver over gold.The two supporting indicators are turning positive.The target for the current bounce is at the top
of the blue channel.
Featured is the daily bar
chart for TIP the bond fund that is indexed for inflation.Price
dropped sharply in May and June when it was thought that the FED might reduce
its bond purchases (TIPs are bonds after all).Recently however the people who
buy TIPs are sniffing the first whiffs of price inflation, and the arrows point
to breakouts while the supporting indicators are positive.Price
inflation is the delayed result of monetary inflation and a source of energy
for gold and silver to rise.
�“The truly Unique Power of a
Central Bank, after all, is the power to create money, and ultimately the
power to create is the power to destroy.�”�…..Paul Volcker, US FED Chairman 1979
�– 1987.
Peter Degraaf is an online stocks and
bullion trader, with over 50 years of investing experience.He
produces a daily report for his many subscribers, in 17 different countries.For a sample copy of a recent report contact
him at itiswell@cogeco.net or visit his website www.pdegraaf.com
DISCLAIMER:Please do your own due diligence.Peter Degraaf is not responsible for your trading decisions.
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