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February 23, 2008

Could Gold Mimic Platinum's Move?
by Mike Paulenoff

My technical work is telling me (and has been telling me) that gold prices (the GLD) is on borrowed time on the upside, and that they will implode IF in fact the global slowdown story has any merit. Then again, growing perceptions of stagflation could last a while longer, until the commodity sector rolls over amidst evidence of a global economic contraction.

Or, maybe we are in a window of time when all of the stimulus from lower interest rates, Government stumulus rebate checks, tax refunds, help for those trapped in the "mortgage squeeze," et. al., is impacting short term asset allocation to the nth degree, and which could propel gold prices considerably higher than $1000?

I really don't know, but I offer you this view of gold prices compared with the behavior of platinum as food for thought on the issue(s).

The argument in favor of upside continuation of gold prices centers around 1) growing monetary inflation (perpetuated by the world's central banks in general and by the Fed in particular); 2) a slide in the value, or perceived desirability, of the holdings of too many reserve dollars; 3) a psychological hedge against an implosion in the financial markets and/or the financial system; and 4) its underlying bull trend that has strengthened and accelerated since August.

Of course, there are other reasons, too, but I think I have covered the main ones. Do any of them surprise you, or give you a sudden reason to go out and pile into twice or three times as much of a long position in gold here? No, which means that lots of bullish news is baked into the upmove from $650 to $950.

So where is the impetus for the next upleg to $1000 and beyond? Just maybe we should take a look at the action in platinum, which has climbed nearly 50% in price just in the past 4 weeks, and which "has gone vertical." Could gold mimic the move in platinum and take off, or does the fact that gold has not taken off yet while platinum has gone ballistic suggest it will not? I really don't know the answer, but until gold prices decline and inflict some technical damage (below $915), I have to leave open the possibility of a gold thrust that mimics platinum.

Mike Paulenoff
www.mptrader.com

Mike Paulenoff is author of the MPTrader.com (www.mptrader.com), a real-time diary of his technical analysis and trading alerts on ETFs covering metals, energy, equity indices, currencies, Treasuries, and specific industries and international regions.

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Copyright © 2007-2008 Mike Paulenoff

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