Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Coronavirus Pandemic Vaccines Indicator Current State - 3rd Mar 21
AI Tech Stocks Investing 2021 Buy Ratings, Levels and Valuations Explained - 3rd Mar 21
Stock Market Bull Trend in Jeopardy - 3rd Mar 21
New Global Reserve Currency? - 3rd Mar 21
Gold To Monetary Base Ratio Says No Hyperinflation - 3rd Mar 21
US Fed Grilled about Its Unsound Currency, Digital Currency Schemes - 3rd Mar 21
The Case Against Inflation - 3rd Mar 21
How to Start Crypto Mining Bitcoins, Ethereum with Your Desktop PC, Laptop with NiceHash - 3rd Mar 21
AI Tech Stocks Investing Portfolio Buying Levels and Valuations 2021 Explained - 2nd Mar 21
There’s A “Chip” Shortage: And TSMC Holds All The Cards - 2nd Mar 21
Why now might be a good time to buy gold and gold juniors - 2nd Mar 21
Silver Is Close To Something Big - 2nd Mar 21
Bitcoin: Let's Put 2 Heart-Pounding Price Drops into Perspective - 2nd Mar 21
Gold Stocks Spring Rally 2021 - 2nd Mar 21
US Housing Market Trend Forecast 2021 - 2nd Mar 21
Covid-19 Vaccinations US House Prices Trend Indicator 2021 - 2nd Mar 21
How blockchain technology will change the online casino - 2nd Mar 21
How Much PC RAM Memory is Good in 2021, 16gb, 32gb or 64gb? - 2nd Mar 21
US Housing Market House Prices Momentum Analysis - 26th Feb 21
FOMC Minutes Disappoint Gold Bulls - 26th Feb 21
Kiss of Life for Gold - 26th Feb 21
Congress May Increase The Moral Hazard Building In The Stock Market - 26th Feb 21
The “Oil Of The Future” Is Set To Soar In 2021 - 26th Feb 21
The Everything Stock Market Rally Continues - 25th Feb 21
Vaccine inequality: A new beginning or another missed opportunity? - 25th Feb 21
What's Next Move For Silver, Gold? Follow US Treasuries and Commodities To Find Out - 25th Feb 21
Warren Buffett Buys a Copper Stock! - 25th Feb 21
Work From Home Inflationary US House Prices BOOM! - 25th Feb 21
Man Takes First Steps Towards Colonising Mars - Nasa Perseverance Rover in Jezero Crater - 25th Feb 21
Musk, Bezos And Cook Are Rushing To Lock In New Lithium Supply - 25th Feb 21
US Debt and Yield Curve (Spread between 2 year and 10 year US bonds) - 24th Feb 21
Should You Buy a Landrover Discovery Sport in 2021? - 24th Feb 21
US Housing Market 2021 and the Inflation Mega-trend - QE4EVER! - 24th Feb 21
M&A Most Commonly Used Software - 24th Feb 21
Is More Stock Market Correction Needed? - 24th Feb 21
VUZE XR Camera 180 3D VR Example Footage Video Image quality - 24th Feb 21
How to Protect Your Positions From A Stock Market Sell-Off Using Options - 24th Feb 21
Why Isn’t Retail Demand for Silver Pushing Up Prices? - 24th Feb 21
2 Stocks That Could Win Big In The Trillion Dollar Battery War - 24th Feb 21
US Economic Trends - GDP, Inflation and Unemployment Impact on House Prices 2021 - 23rd Feb 21
Why the Sky Is Not Falling in Precious Metals - 23rd Feb 21
7 Things Every Businessman Should Know - 23rd Feb 21
For Stocks, has the “Rational Bubble” Popped? - 23rd Feb 21
Will Biden Overheat the Economy and Gold? - 23rd Feb 21
Precious Metals Under Seige? - 23rd Feb 21
US House Prices Trend Forecast Review - 23rd Feb 21
Lithium Prices Soar As Tesla, Apple And Google Fight For Supply - 23rd Feb 21
Stock Markets Discounting Post Covid Economic Boom - 22nd Feb 21
Economics Is Why Vaccination Is So Hard - 22nd Feb 21
Pivotal Session In Stocks Bull Bear Battle - 22nd Feb 21
Gold’s Downtrend: Is This Just the Beginning? - 22nd Feb 21
The Most Exciting Commodities Play Of 2021? - 22nd Feb 21
How to Test NEW and Used GPU, and Benchmark to Make sure it is Working Properly - 22nd Feb 21
US House Prices Vaccinations Indicator - 21st Feb 21
S&P 500 Correction – No Need to Hold Onto Your Hat - 21st Feb 21
Gold Setting Up Major Bottom So Could We See A Breakout Rally Begin Soon? - 21st Feb 21
Owning Real Assets Amid Surreal Financial Markets - 21st Feb 21
Great Investment Ideas For 2021 - 21st Feb 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

One More Nail In The Coffin Of The Gold Bears

Commodities / Gold and Silver 2010 Jan 08, 2010 - 01:54 PM GMT

By: Peter_Degraaf


Best Financial Markets Analysis Article“The State is that great fiction by which everyone tries to live at the expense of everyone else.”  ….. Frederic Bastiat.

The bullish case for gold continues to build.  The old adage ‘more dollars chasing fewer goods’ is particularly apt for gold.

  • For the first time in history practically every Central Bank is adding to the money supply of its respective country.
  • Despite a record high gold price, new supply from mines is declining, due to the fact that the ‘easy to find gold’ has already been found.
  • Comparing the current gold rush to the price rise in 1980 we find that there are currently 2.4 billion people in the world who were not alive in 1980.  That is an increase of 53%!
  • A large percentage of this huge increase has occurred in China and India.  By coincidence the people in those two countries love to own gold.
  • Mining costs are increasing, due to the fact that the price for raw materials used in construction is rising.  The price of oil has doubled in price during the past 12 months.  Earth moving machines and large trucks use up a lot of oil!
  • Red tape and bureaucracy slow down the building of a new mine.  It can take as much as ten years and require a billion dollars to build a substantial gold mine today.
  • Greenlight Hedge Fund recently converted its position of holding shares in GLD into physical gold.  A lot of traders and hedge fund managers follow the trading pattern of GHF.  Their example is moving from ‘paper into physical’.
  • Central Banks have seen the ‘writing on the wall’ and on balance have become buyers of gold instead of sellers.  Since they own the printing presses, they have no problem coming up with the funds.
  • The Chinese Central Bank holds record amounts of US dollars, while their holding of gold at 1.8% is among the lowest percentage of central bank holdings.  They are on record of wanting to ‘buy the dips’.
  • Investment demand is increasing as more and more investors become aware of the gold bull market.
  • As currencies lose favor with the public, there will be a growing number of government officials who will call for a ‘stable currency’ to replace the fiat currencies, in particular to replace the over-inflated US dollar. 
  • It is a historical fact that once a country goes down the path of currency inflation, (instead of taxation in order to pay its debt), in every instance that currency eventually becomes worthless.  It has happened in at least 40 countries (including the USA) in the past.
  • Gold discounts future price inflation, and by rising predicts the price inflation that follows monetary inflation.
  • The US Monetary Base (controlled by the US FED), rose from zero in 1776 to 800 billion dollars in 2008.  Since 2008 it has risen by 1200 billion dollars, to the current 2 trillion dollars.
  • The monetary inflation in the USA alone dwarfs anything that has happened in the past, including WWI, WWII, the Korean conflict, and the race to the moon.
  • Politicians have no conception of the amount of dollars that make up a trillion.
    Most of them have never even run a candy store!  The vast majority have never had to ‘meet a payroll.’

This chart (courtesy Federal Reserve Bank of St. Louis), shows the current federal deficit.  This deficit must either be paid for with an increase in taxes (not likely), or by borrowing (from whom?), or by ‘currency degradation’ (very likely).

The gold bears (especially the deflation crowd), continue to steer people away from buying gold.  They are costing their readers potential profits!

They warn their readers that the US dollar is about to stage a miraculous recovery.  Perhaps this next chart will throw some cold water on that argument.

This chart courtesy Dan Norcini who is a ‘super chartist’ at

The red line follows the ‘net short’ position of commercial traders in the US dollar.  The ‘net short’ position at the moment is more than 40,000 contracts.  This is the largest ‘net short’ position for at least seven years.  In late 2005 the chart shows us a net short position of 30,000.  The US dollar (next chart), at about that time topped out at 92 and fell to 71.
In late 2008 the net short position reached 35,000.  The US dollar back then topped out at 88 and fell to 77.5.

In order for the gold bears to be right, the US dollar is going to have to behave contrary to recent history.   


Chart courtesy

In order for the US dollar to stage a rally from here, the dollar bulls are going to have to do battle with the commercial traders who have a vested interest in holding the line, and are capable (as in the past), to cause the dollar to fall.  Fundamentally, the FED is not able to support the dollar with higher interest rate.  Not now!  Maybe later on, but not now!


Another argument put forth by the gold bears is this:  ‘The DOW is about to crash and when that happens, gold shares will fall just as hard’.

What say the charts?

This chart courtesy, highlights periods where the HUI index of gold and silver stocks rose faster than the S&P 500 index (top of chart), while the S&P 500 was declining (bottom of chart).

During two of the three periods highlighted here, the HUI outperformed, while the S&P declined, while in 2004 the HUI held its own while the S&P fell.

So much for the argument that gold stocks will fall when the S&P suffers a drop in value!

Featured is the index that compares gold to bonds.  It compares ‘real wealth’ to ‘certificates of guaranteed confiscation’ (that is what Ludwig von Mises called bonds).

The breakout at the 8.50 neckline in the reversed ‘head and shoulders’ formation predicts a target at the green arrow.  This is a bull in full gallop.  The higher this trend goes, the more money will flow from disappointed bond holders into the gold market.  Notice the positive alignment of the two moving averages (green oval).

We end this article with the current gold chart.  Price has found support at the 1070 level and is ready to rise to new heights, based on the fundamentals listed at the top of this essay.  The bears will try to hold gold down below 1145, but they are expected to fail after a while. .

As long as gold stays above the rising 200 week moving average, the increase is 18% per year.  That’s better than money in the bank – much better!

Notice the positive alignment between the two moving averages (green oval).

In previous articles (available in the archives), I pointed out the importance of these ‘golden crossovers’, and in so doing was able to keep my subscribers from selling their gold (except for a spot of profit-taking at the end of November 2009).

“Those who buy the dips and ride the waves will prosper”  ….Richard Russell.

Happy trading!

By Peter Degraaf

Peter Degraaf is an on-line stock trader with over 50 years of investing experience. He issues a weekend report on the markets for his many subscribers. For a sample issue send him an E-mail at , or visit his website at where you will find many long-term charts, as well as an interesting collection of Worthwhile Quotes that make for fascinating reading.

© 2010 Copyright Peter Degraaf - All Rights Reserved

DISCLAIMER: Please do your own due diligence. I am NOT responsible for your trading decisions.

Peter Degraaf Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules