• 847 days Will The ECB Continue To Hike Rates?
  • 848 days Forbes: Aramco Remains Largest Company In The Middle East
  • 849 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 1,249 days Could Crypto Overtake Traditional Investment?
  • 1,254 days Americans Still Quitting Jobs At Record Pace
  • 1,256 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 1,259 days Is The Dollar Too Strong?
  • 1,259 days Big Tech Disappoints Investors on Earnings Calls
  • 1,260 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 1,262 days China Is Quietly Trying To Distance Itself From Russia
  • 1,262 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 1,266 days Crypto Investors Won Big In 2021
  • 1,266 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 1,267 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 1,269 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 1,270 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 1,273 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 1,274 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 1,274 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 1,276 days Are NFTs About To Take Over Gaming?
Is The Bull Market On Its Last Legs?

Is The Bull Market On Its Last Legs?

This aging bull market may…

What's Behind The Global EV Sales Slowdown?

What's Behind The Global EV Sales Slowdown?

An economic slowdown in many…

How The Ultra-Wealthy Are Using Art To Dodge Taxes

How The Ultra-Wealthy Are Using Art To Dodge Taxes

More freeports open around the…

  1. Home
  2. Markets
  3. Other

Gold Market Update

Originally published September 21st, 2008.

Although gold staged an amazingly powerful rally last Wednesday and Thursday, some are worried that the reaction on Friday, seemingly in response to the newly hatched "bailout plan" by the government and the Fed, marks the start of a slump back into obscurity as the bailout plan "works", so that last week's sharp rally turns out to have been nothing but a temporary spike. So let's make several things clear.

First the strong rise last week was not a spike but a powerful breakout move that marks the start of a major uptrend. Second, the bailout plan will only "work" to the extent that it succeeds in pushing off the debt and liabilities of banks and brokers etc onto the taxpayer and any foreigners who are crazy enough to buy US Treasury paper. This is the real purpose of the plan - to rescue cronies and pals on Wall St at public expense. Thirdly, the bailout plan is hugely inflationary as the money to finance it will have to be electronically created, and it is thus very bullish for the Precious Metals. Finally, it is naive in the extreme to assume that foreigners will continue to finance this circus by buying endless streams of US Treasury paper. The increasingly desperate and reckless actions of the government and the Fed are risking cutting the jugular of the US, the T Bond market - bonds plunged on Friday as predicted on the site last Wednesday, a move that is believed to mark the start of a savage bearmarket. A collapse in the bond market will send rates through the roof and implode the already extremely fragile US economy, weakened as it is by massive debt overhangs.

On the 6-month gold chart we can see the breakout move on Wednesday and Thursday and how it broke the price clear above the line of resistance shown and also briefly took it above its 3 principal moving averages, the 50, 200 and 300-day. The reaction back on Friday is quite normal given the magnitude of the preceding rise that quickly generated a short-term overbought condition shown by the MACD histogram at the bottom of the chart. Given the enormously inflationary implications of the bailout plan, it is hard to see gold reacting back much further - on the contrary it is likely to continue higher soon, and the vigor of the brakout move implies that it won`t be long before we see new highs.

On the long-term gold chart we can see that, as pointed out in the last update, it never looked bearish, even after the steep reaction of recent months. While there is clearly a substantial body of resistance residing in the sizeable intermediate top area of earlier this year, the magnitude of last week's advance shows that gold "means business" and should have little trouble in going on to overcome this resistance and continue on to new highs in due course and it should be noted that the hugely inflationary implications of the bailout plan coupled with the prospects for a collapsing dollar could easily result in an accelerating trajectory out of the top of the channel shown.

 

Back to homepage

Leave a comment

Leave a comment