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Gold (GLD) is
consolidating after hitting a two-week high. Investors are witnessing renewed
strength in precious metals after the Fed announced the expansion of
Operation Twist until at least the end of the year.
Similarly,
gold and silver (SLV) have been recently moving higher based on the eurozone and stocks are breathing a sigh of relief as the
summit came up with a purported solution to reduce funding costs,
particularly for Italy and Spain, worth $149 billion. This may stimulate the eurozone. In addition, precious metal investors appear to
be optimistic as the European Central Bank, Bank of England and the People's
Bank of China concurrently ease interest rates to stimulate global growth in
the depressed eurozone, which is experiencing
record unemployment. So optimism is returning to Europe while the U.S., which
has heretofore been a safe haven, is beginning to show signs that
unemployment may be lurking higher.
U.S. jobs
data on Friday was lackluster. Weaker numbers going into the election could
once again restart discussion of QE3. A possible coordinated stimulus by the
ECB and China could be a catalyst for fund managers and traders returning
from their 4th of July holiday vacation.
This week
should be quiet but next week could be exciting, especially if we witness
this worldwide coordinated effort to stave off a pandemic meltdown before the
2012 U.S. presidential election.
Over the past
three years we have seen positive reversals in gold bullion in the summer
months. The second half could represent an explosive move in the yellow metal
as a coordinated worldwide stimulus begins. Nations such as Japan, EU,
England and the U.S. are attempting to devalue their currencies in order to
create growth and payoff soaring debts. Austerity is unpopular and the only
solution is to continue to monetize the debt.
 
Gold is
regaining the 50-day moving average at $1600 and $1640 would be the next area
of resistance. Traders are looking to see if silver gets to $29 regaining the
50-day moving average and breaking the four-month downtrend to the upside.
Gold is moving into the favorable third quarter, which has proven the past
three years to make powerful reversals higher. This may also benefit the
wealth in the earth undervalued gold producers (GDX) and the bargain-priced
junior explorers (GDXJ) which are hitting multi-year lows.
In
conclusion, increasing amounts of money is being printed worldwide. Inflation
may be the only recourse for governments in trouble. We raise an unimaginable
consideration. Could it be that the bankers and Federal Reserve Board
eventually must devalue the dollar to keep pace with other nations to pay off
soaring debts? We are fully aware that such a scenario might exist somewhere
down the fiat paper road. Just a thought.
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