Here on the weekly gold chart you can see a clear breakout from an inverse head and shoulder pattern. These type of technical patterns suggest tremendous strength. There is no doubt that over time gold is going much much higher. This technical pattern is confirmation rather than cause. The cause is the mind boggling debt load of the US government and the US consumer. Europe is also drowning in debt. Japan is on the verge of implosion. And even China, the current engine of world growth, is sitting on top of a debt fueled construction bubble that dwarfs the construction bubbles of Japan and the US.
The only possible governmental response to all this debt is massive paper money creation.
At some point, however, there will be another frightening round of deleveraging. It could start tomorrow. It could start in a year. When it does the paper price of gold may well temporarily collapse with everything else. That is when the bullion price and the paper price will decouple.
Even over the past two years the price for a ton of physical gold - for those who purchase in that type of quantity - has stopped responding to fluctuations in the futures price.
When distrust of paper reaches a certain threshold, this will become true for the price of an ounce of gold.
It's great to trade gold in this environment if you can do it. But get a little bullion - gold and /or silver. In the end, bullion will outperform futures, stocks, tracking stocks and all forms of paper gold and silver.
No comments:
Post a Comment