Best of the Week
Most Popular
1. Will Gold Price Breakout? 3 Things to Watch… - Jordan_Roy_Byrne
2.China Invades Saudi Oil Realm: PetroDollar Kill - Jim_Willie_CB
3.Bitcoin Price Trend Forecast, Paypal FUD Fake Cryptocurrency Warning - Nadeem_Walayat
4.The Stock Market Trend is Your Friend ’til the Very End - Rambus_Chartology
5.This Isn’t Your Grandfather’s (1960s) Inflation Scare - F_F_Wiley
6.GDX Gold Mining Stocks Fundamentals - Zeal_LLC
7.US Housing Real Estate Market and Banking Pressures Are Building - Chris_Vermeulen
8.Return of Stock Market Volatility Amidst Political Chaos and Uncertain Economy - Buildadv
9.Can Bitcoin Price Rally Continue After Paypal Fake FUD Attack? - Nadeem_Walayat
10.Warning Economic Implosion on the Horizon - Chris_Vermeulen
Last 7 days
Stock Market Predictive Modeling Is Calling For A Continued Rally - 22nd Apr 18
SWEATCOIN - Get PAID to WALK! Incentive to Burn Fat and Lose Weight - Review - 22nd Apr 18
Sheffield Local Elections 2018 Forecast Results - 22nd Apr 18
How Long Does it take for a 10%+ Stock Market Correction to Make New Highs - 21st Apr 18
Sheffield Ruling Labour Party Could Lose 10 Council Seats at May Local Elections - 21st Apr 18
Crude Oil Price Trend Forecast - Saudi Arabia $80 ARAMCO Stock IPO Target - 21st Apr 18
Gold Price Nearing Bull Market Breakout, Stocks to Follow - 20th Apr 18
What’s Bitcoin Really Worth? - 20th Apr 18
Stock Market May "Let Go" - 20th Apr 18
Overwhelming Evidence Against Near Stock Market Grand Supercycle Top - 20th Apr 18
Crude Oil Price Trend Forecast - Saudi's Want $100 for ARAMCO Stock IPO - 20th Apr 18
The Incredible Silver Trade – What You Need to Know - 20th Apr 18
Is War "Hell" for the Stock Market? - 19th Apr 18
Palladium Bullion Surges 17% In 9 Days On Russian Supply Concerns - 19th Apr 18
Breadth Study Suggests that Stock Market Bottom is Already In - 19th Apr 18
Allegory Regarding Investment Decisions Made On Basis Of Government’s Income Statement, Balance Sheet - 19th Apr 18
Gold – A Unique Repeat of the 2007 and How to Profit - 19th Apr 18
Abbeydale Park Rise Cherry Tree's in Blossom - Sheffield Street Tree Protests - 19th Apr 18
The Stock Market “Turn of the Month Effect” Exists in 11 of 11 Countries - 18th Apr 18
Winter is Coming - Coming Storms Will Bring Out the Best and Worst in Humanity - 18th Apr 18
What Does it Take to Create Living Wage Jobs? - 18th Apr 18
Gold and Silver Buy Signals - 18th Apr 18
WINTER IS COMING - The Ongoing Fourth Turning Crisis Part2 - 18th Apr 18
A Stock Market Rally on Low Volume is NOT Bearish - 17th Apr 18
Three Gold Charts, One Big Gold Stocks Opportunity - 17th Apr 18
Crude Oil Price As Bullish as it Seems? - 17th Apr 18
A Good Time to Buy Facebook? - 17th Apr 18
THE Financial Crisis Acronym of 2008 is Sounding Another Alarm - 16th Apr 18
Bombs, Missiles and War – What to Expect Next from the Stock Market - 16th Apr 18
Global Debt Bubble Hits New All Time High – One Quadrillion Reasons To Buy Gold - 16th Apr 18
Will Bitcoin Ever Recover? - 16th Apr 18
Stock Market Futures Bounce, But Stopped at Trendline - 16th Apr 18
How To Profit As Oil Prices Explode - 16th Apr 18
Junior Mining Stocks are Close to Breaking Downtrend - 16th Apr 18
Look Inside a Caravan at UK Holiday Park for Summer 2018 - Hoseasons Cayton Bay Sea Side - 16th Apr 18
Stock Market More Weakness? How Much? - 15th Apr 18
Time for the Gold Bulls to Show their Mettle - 15th Apr 18
Trading Markets Amid Sound of Wars - 15th Apr 18
Sugar Commodity Buying Levels Analysis - 14th Apr 18
The Oil Trade May Be Coming Alive - 14th Apr 18

Market Oracle FREE Newsletter

Trading Lessons

Why Gold Will Get Whacked Again!

Commodities / Gold & Silver May 25, 2008 - 04:23 PM GMT

By: Alex_Wallenwein

Commodities Best Financial Markets Analysis ArticleGold has recovered from its previous two “whacks” rather nicely this past week and the Friday before, but it will very likely be whacked again very soon, possibly as early as this coming Monday.

Why?

Because gold is rising while the Dow/US stocks are in ultra-dangerous territory.


That is the one thing the “powers” cannot tolerate. Confidence in the dollar is apparently no longer a necessity for those who operate our economy from behind the scenes. In fact, a falling dollar is utterly desirable for them, for reasons to be discussed below.

A primary stock market collapse, alone, is also not to high on their list of no-nos, but a collapsing stock market alongside a collapsing bond market alongside rising gold prices cannot, must not be tolerated.

If such were to come to pass, investors would have no place else to go but to foreign stocks – and to precious metals stocks.

Here is what's happening to the Dow:

After breaking its resistance line in April during what looked to many as a “powerful rally”, the Dow has betrayed the fundamental weakness of its recent, post-Bear Stearns, recovery by shying away from its 200-day moving average twice, breaking its recent uptrend, and falling below even its 60-day moving average. It is now about halfway between its resistance and its level 1 support.

This is what it looks like from closer up, time-wise:

The engineered nature of this phony uptrend was revealed by the fact that it consisted largely of huge one or two-day rises which were inevitably followed by a series of smaller drops that at first capped and frequently eventually all but negated the previous rises.

Normal, healthy uptrends just don't look that way.

I would venture a prediction that, as soon as the Dow hits or crashes through support level 1, gold will be whacked again. If not, the Dow threatens to fall through its level 2 support, which would bring it below the January 200 high of 11,750 – and that would finally reveal that every bit of the Dow's recovery since then was contrived.

The NYSE looks very similar, except that it briefly managed to break above its 200-day MA before succumbing to its fundamental weakness, and except for the fact that its support level #2, going back to January 2000, lies far below current levels, namely at 7000. Which only means that, once it breaks below support level 1, it has along, long ways to go before it finds support.

The fundamental picture supports these chart views. Inflationary expectations are high, oil prices are high and climbing with no end in sight, US economic activity is declining, and the dollar is dropping out of sight, which makes investing in US assets far less profitable for foreigners with stronger currencies.

Under these conditions, profits are hard to come by for US companies, so their stocks tend to be weak.

At the same time US bonds have passed their historic peaks and are now engaged in a secular decline. If we're lucky, that decline will show itself only gradually, but it is very possible that it will come abruptly. That means US interest rates will be rising in spite of the Fed's frantic attempts to keep them low so as to “re-ignite” the economy.

Unfortunately, the only thing the Fed will set on fire is its paper currency – and that's why ultimately, gold will not be suppressed for long. We are now approaching June. By the end of August or early September, the next leg up in gold's price will begin. That's only three months away.

Yet, for right now, gold is still vulnerable. Indians are no longer buying much and have started to sell. Jewelers are having a hard time because their gilded adornments are getting too expensive for cash-strapped customers. Investment demand is up world wide, but the word still hasn't gotten around to western mainstream investors quite yet – and that is what must be avoided at all cost, even if such avoidance amounts to nothing more than delays.

Gold has only surpassed short term trend lines 1 and 2. Number 3 is still a ways off, which means gold has not yet surpassed its most recent high. At the same time it is struggling to stay above its 50-day moving average. The more vulnerable gold is, the easier it is for the powers to effect a swift and severe downward move. In view of the current Dow-situation, their window of opportunity is very small.

Expect them to first try another artificial boost to the Dow by extensive futures buying on Monday morning. Maybe some concocted news of concocted economic data will be published. Most likely, that won't work, though.

That's why gold will be whacked, again – but so what? Investing is more fun when you can buy cheap

Got gold?

Alex Wallenwein
Editor, Publisher
The EURO VS DOLLAR MONITOR

Copyright © 2008 Alex Wallenwein - All Rights Reserved

Alex holds a B.A. degree in Economics and a juris doctorate in Law. His forte is research. In late 1996, he began to research how money is used by some to exert political and economic control over others' lives. In the process, he discovered that gold (along with silver) is the common man's antidote to this effort. In writing and publishing the Euro vs Dollar Monitor, he explains the dynamics of this process and how individuals can harness the power of gold in their efforts to regain their political and financial autonomy.

Just like driving your car, investing only makes sense if you can see where you are going. The Euro vs Dollar Monitor is the golden windshield wiper that removes the media's greasy film of financial misinformation from your investment outlook. Don't drive your investment vehicle without it!

Alex Wallenwein Archive

© 2005-2018 http://www.MarketOracle.co.uk - 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