Gold is hot and demand is rising. Given the financial crisis, more than ever all kinds of people are eager to own a little gold, and not only paper contracts but physical as well.
Recently, a representative of Credit Suisse said he was surprised over the surging demand for physical delivery of gold. Similar comments were elicited from the Dutch Bank. Meanwhile, silver coin and bar dealers here in Holland are running on empty and are being forced to tell eager customers willing to pay premiums to spot that there is simply nothing in stock.
Strangely enough, these comments seem to be surfacing worldwide. Under the circumstances, one would expect the Gold (and Silver) price to skyrocket, but it hasn't, at least not in terms of US dollars.
That's why I thought it would be prudent to take a closer look at Gold's relative performance against the other major currencies of the world to gain a better perspective of what is really going on in the markets.
Let's start with the usual Gold in US dollars:
The chart is telling us that nothing serious has happened. The only thing we see is a sharp correction, nothing more. The uptrend is still very much intact, and if Gold manages to stay above the magenta line 2 we will eventually see another new wave higher after Gold has broken above the green descending resistance line.
Gold vs. Euro
Currently we may be witnessing the start of a big wave higher. If the interpreted pattern is correct, Gold is breaking out of a flag/pennant pattern and this breakout triggers a price target well above the last high! The breakout, if successful, should send Gold to the 700 to 725 level.
Gold vs. British Pound
This chart is similar to the Euro index. A flag pattern is forming, only here Gold hasn't yet begun to breakout. If the breakout occurs, a price target is triggered of 575 or possibly even higher.
Gold vs. Swiss Franc
Again, we see a similar chart to both the Euro and British Pound. A flag pattern is being formed, but here again Gold is still held within the pattern. Promisingly, not much is needed to trigger a breakout, with a target of 10.75.
Gold vs. Yen
This chart is different than the others. We can see that Gold is still in a correction mode after the high reached earlier this year. However, the chart still looks very solid, and will continue to as long as the support zone holds. The only thing that might spoil this positive outlook is the fact that Gold bounced off the MA's and is heading down again towards the support at 8/8.5. This could mean a lower high has been established with a lower low to follow.Gold vs. Australian Dollar
This is a really beautiful chart. The recent breakout from a pennant pattern was followed by a powerful rise to a new high. There's also an additional buy signal coming up with the 17 w. MA on the verge of a crossing above the 34 w. MA which would lead to both MA's rising in support of the Gold price.
The breakout has also triggered buy signals in the RSI, DMI (buying power) and the MACD, suggesting that this move should continue for some time.
Gold vs. Canadian Dollar
This chart still looks very solid, and it will improve even more if Gold manages to break back above the MA's as well as the green resistance line.
If the breakout is established shortly, we will see supporting buy signals in the RSI, DMI and MACD.
All charts are courtesy of Stockcharts.com
Conclusion
Collectively, these charts are telling us that Gold is still attractive in many currencies, and in some cases appears to be on the verge of further breakouts. If the charts have any predictive power for what's to come we should see gold rising further through the end of this year and well into the next.
It's still not too late to step in and buy yourself a little chunk of the yellow metal.
The above is an excerpt from the technical analysis portion of the monthly Resource Fortunes Premium Newsletter publication, available in its entirety for subscribers at http://www.resourcefortunes.com/. We currently offer a 30-day trial subscription for $2.99.
