Gold Chart Update ( 26-March 2013)

Current events in Cyprus could be the catalyst for the next major up-leg in Gold price, but it would need a sustained break above key level to trigger the next leg up to go to at least $1800.  

However, it would need a clear break above $1800 to cause a panic short-covering rally.

Key Point-of-Control Level is $1640

First Resistance = $1800

First Support = $1540-$1560

April Gold Futures Chart

Gold Price Update

With the Euro-zone bank-run accelerating on a daily basis, sapping liquidity out of the system, and financial amageddon coming closer, the end of the Euro currency and the total economic collapse of the Euro-zone countries is coming closer and closer by the day, unless of course they engage in massive money-printing to support the collapsing countries and banks.

Money printing can either be done directly by their own central bank ECB or indirectly by the US Federal Reserve via SWAPS agreements. Many europeans are very reluctant to engage in money-printing because of their qute recent experience with hyperinflation/currency collapse in both France during the French Revolution and the Weimer Republic hyperinflation episodes in the 1920's. Because of the overwhelming objection by the public the European governments may have to do a discreet money-printing via the Federal Reserve SWAPS agreement. The concept is the same is the same but most people would never notice it.

Massive money-printing out of thin air is highly inflationary and could easily lead to currency collapse/hyperinflation. When faced with the choice of a total collapse now if they do nothing, or print and delay the financial amageddon, the choice for the politicians and the Keynesian economists who currently dominate the mainstream economic landscape is clear, and that is to print and print money until the total system implodes.

Here is a link to youtube video on the French hyperinflation episodes 1 and 2:

http://www.youtube.com/watch?v=7zvNV-vkEzc
http://www.youtube.com/watch?v=U4aRuiO1OuQ&feature=related

Money-printing program is extremely bullish for the price of gold and silver as these two metals are time-tested alternative currency that cannot be debased by governments, and that is not only a hedge against inflation but also a store of value against sovereign and currency collapse.

When they start to engage in massive money-printing, which they will as there is NO other choice, it is either print & delay the collapse or not print and collapse now,  the price of gold and silver should start to break out of the current consolidation zone and starts to break out to the upside again.

Key price level for gold is a clear break above US$1,800

Next upside target for gold is between US$2,400 - $2,500per ounce, and it can get there very very quickly.

Key level for silver is about US$44 per ounce. Silver pullback since May has taken the form of an equal leg ABC zig zag. A break above wave B high ($44) of an ABC correction implies the pullback is over, and that the next trending leg up is underway.

Once silver breaks out of the current consolidation, its next upside price target is US$75 per ounce.

A Case For Gold

With a major European bank specifically SoGen on the precipice of a total collapse just like Lehman Brothers in 2008, the stage is set for credits to freeze up in Europe anytime now. The impact should reverberate not only across Europe but around the world surely to cause major financial havoc that could severely crash the global market.

If so, Libor rates is certain to shoots up into the stratosphere which would decapitated the global financial system and cause a major global stock market crash more severe that the 2008 stock market crash.

The world central banks would likely intervene to supply liquidity but because they were so heavily criticized during the 2008-2209 financial crisis, they may be a little timid at first, which would be extremely bad for the global markets because once the system has collapsed it will be very difficult to support.

At the heart of the problem is a banking crisis, over-indebted and over-leveraged banks, problems they had in 2008 but was never solved because the world central banks, being run by Keynesian economists, never understood the problem, hence had prescribed the wrong medicine. Instead of solving the problem, they exacerbate the situation and had simply delayed the inevitable reckoning, the eventual bursting of the debt bubble.

Credit crunch will come, it is just a matter of when, In what form and how agressive the world Central Bankers would handle it this time around will tell us the trajectory of the incoming financial crisis that we can take advantage of and profit from. My guess is that the Fed would initially open up liquidity SWAP lines with major central banks in order to ease the credit crunch, but should that is deemed insufficient they will intervene by directly buying up the collapsing stocks. Governments in their misguided attempt would likely come in with "fiscal stimulus" but instead of helping the situation it that would greatly exacerbate the crisis.

A timid response would be bad for the markets in the short-run but good in the long-run. The stock markets would crash and gold and silver prices should explodes further to the upside as "smart" global investors stampede into safe haven assets. Dumb money will pile into government bond of course, falsely thinking that bond is a safe haven.

I will be watching out for a major flash-crash that can easily sends dow 1000's of point down in a short period of time as investors are forced to liquidate their positions.

An aggressive response should slow down the collapse but could accelerate fiat currency collapse, causing the already accelerating gold price to go up even faster. Many investors will be running into government bonds, but although they will not lose their "fiat paper money", currency collapse would render their dollars or Euros worthless

How high will the price of gold go to in an event of a currency collapse? There is no limit to the upside because gold, as the only "true money", with supply that cannot be arbitrarily increase by central bank, is simply reflecting the the true value of real things. We have see recently that an egg can cause a few trillion Zimbabwe dollars.

Gold Price Is In Acceleration Mode Up

A massive end of day buying binge by the Plunge Protection Team engineered to squeeze the short-sellers and influence market sentiment, triggered just after the released of the FOMC minutes on Tuesday pushed many markets which have been tanking all day, to close up in positive territory.

Whether they can keep supporting the market up for an extended period of time only time will tell but I suspect they would not be able to keep rigging the market for too long as it gets more and more costly to do so particularly in an environment of accelerating government and central banks debt and collapsing paper currencies against a backdrop of the unwinding speculative bets that is now crushing global liquidity/credit supply.

The flight to safe haven assets particularly into gold is only beginning to accelerate. Already there are several major banks that is falling victim to this unfolding flight to safety, gold. Bank of America and Society Generale are both on the brink of total collapse and its contagion effect surely has the potential to bring down the whole global financial system. When that happens the flight from fiat paper currencies and into gold should accelerate even faster.

As more and more people realizes that gold is real money that cannot be printed into existense out of thin air, more and more people would exchange their paper money with gold in order to protect their wealth, which will push gold price further and further into the stratosphere.

In 2008 when the banking system collapsed governments and central banks were available to bail them out and pushed the financial system away from the brink of total collapse. For that the governments and central banks are now so heavily in debt and on the verge of collapse themsevles. In fact several countries have already collapsed, first it was Iceland then Ireland and Greece. Now Italy, Spain, France, UK and USA are themsevles on the verge of collapse.

This time around however, when the governments and central banks collapses there is no bigger entity to come to their rescue. Some may argue that Central Banks can print the needed money to bail out the monetary system, which is true, but that would only accelerate the currency collapse of whichever country that would undertake such a silly move, but this is precisely what most government would do in their misguided attempt to prevent the inevitable implosion.

Gold, which would be the prime beneficiary of a flight into safe haven asset, would experience a demand that is unprecedented and would price of gold to go balistic. How high will gold price go to depends entirely on how crazy the world's central bank gets with their printing press. It is very likely that they will print and print until the all fiat paper currencies collapses. When that happens  the sky is the limit for gold price because gold is merely reflecting the amount of paper money central banks is printing, the more paper money central bank prints the higher gold price will be as measure in that currency.

Will gold price eventually top? Yes of course one day it will stop going up and then come back down, but that time is still several years away. We are still at the very early stage of currency collapse. It normally takes 2 to 3 years for currency collapse to unfold. It will be clearly evident when that time come.

Just to put the price of gold into perspective, with the current monetary base of the United States, gold price has to go up to between $8,000 to $10,000 per ounce to match gold price high in 1980. But there is an estimated amount of about $12 trillion of US Treasury bond outside the US. If those bond holders starts to stampede of of the US dollar denomiated bonds then US dollar will collapse in a hurry.

Today gold has reach a new price milestone broken above $1.800 per ounce. The stage is set for further explosin in the price of gold as more and more traders who are short the gold market are forced to cover their short positions. Most would lose everything.

The current speed of gold price appreciation is telling me that the shorts are in panic capitulation mode. Once most have capitulated we may get a snap-back decline in gold price that would scare the daylight out of most people. It is possible to see a 38.2% decline within a few weeks just like what happened in the Silver market  at the end of may, but that would be just another opportunity for those still left in the dust to come onboad for the final phase of the gold bull market.

Gold Update

Friday's downgrade of the US debt rating by Standard and Poors is the straw that broke  the camel's back, but it came too little too late, as the downgrade should have occurred a long time ago. The fact is the US has been defaulting on its debt for years via dollar devaluation. One clear evidence is the fact that for the last ten year gold, which is "real" money, has been appreciating on an average of 20% per year, which would have appreciated much high had the Federal Reserve along with the US Treasury not intervene to suppress the price of gold.

A rush out of fiat currencies and into safe haven gold is now intensifying. The stage is now set for gold price explosion and the collapse of the paper currencies around the world. The rush has just begun. I have no doubt the Federal Reserve would try to push gold price down in their attempt to slow down the speed towards total  monetary collapse. How successful will they be in slowing down the endgame of total monetary collapse is difficult to forecast, but one thing for sure is that gold price volatility will surely increase causing wild price swings (up and down) as the battle for supremacy intensifies. Eventually the gold camp will win the war that would leave those trying to short gold  in the dustbin of history.

Gold Update

Today's price high in gold came close to the key $1,700 per ounce, a Line-in-the-Sand for now, a level that will be strongly defended by the short-sellers and it is also the level where many longs will take some profit. Hence as gold price come closer to $1,700 level there will be a lot of selling coming into the market.

Whether or not that selling will cause a large pullback in gold price only time will tell. From a very short term technical perspective, a clear and sustained break above $1,680 could cause many short-sellers to capitulate and cover, causing a major spike in gold price. Without a clear and sustained break above we could see a lot of selling coming into the gold market int he short-term.

In the long term however, gold will continue to go higher as the current monetary system get closer and closer to its end game, a monetary collapse which will usher in a new global monetary system that would be back by gold and silver.

Gold Update

There is hardly any usual summer pause or pullback in gold price this year. Most analysts. traders and investors, lacking the real understanding of sound economics concept (real economics and not the Keynesian economic type) cannot understand why gold price is going up, either shorting gold and losing big-time, missing the entire gold bull run or still on the sideline hoping for a pullback to jump on board. Many are thinking that gold is in a bubble  The percentage of the general population participating in the current gold bull market is still at a minuscule level of about 1% to 2%.. At the previous gold bubble top in 1980 when gold was about $850 per ounce, public participation rate was over 15%. There is a long way to go before gold is in bubble territory.

Looking at the 10-years gold chart (below), it looks to me that gold price is now in its second stage of its bull trend that started in 2001. It is possible that at some point in the future gold may get a large 38.2% snap-back pullback or retracement like the ones that occurred in the silver market in May. From what price level and when that would happens only time and price action would tell. At today's current price level of just above  $1,600 per ounce gold is now nearing a doubling of price from its previous price high of $850 in 1980. Normally a doubling of price is a very important technical price milestone and can bring in profit-taking activities and that doubling in price is $1,700. Will the widely anticipated profit-taking pullback occur as gold approaches $1,700, only time will tell. However, without a major pullback the short-sellers are doomed and if they are force to cover it could propel a fast move up in gold price to a dizzying level.

For now with the Euro zone and the United States in crisis that cannot be solved, gold can continue to go up and up until the current monetary system totally implode. The endgame is the inevitable global collapse of fiat currencies that could send gold price into the stratosphere, which may still be 3 to 5 years away, and could be longer if the governments in the US and Europe continue to mess around with the free market mechanism, which they would most likely would do.

For now, regardless of what the government would do, the system as we know it is doomed to implode. It is as sure as the night would follow the day The only question we need to ask ourselves now is when and in what form the monetary breakdown would occur. The path to our current monetary system implosion would depends very much on what the major powers would do now and in the future, in their misguided attempt to solved the problem. Gold is the only real money, accepted and recognized by every society around the world, as it has been for thousands of years, regardless of what Ben Bernanke think. As such, until the new monetary system emerges to replace the current ones, smart money would continue to flow into gold in exchange for their fiat paper currencies, hence would continue to push the price of gold higher and higher. 

It will end one day in a bubble level, where that would be depends entirely on what would happen. Without any more money-printing by the Federal Reserve, the current gold fair value should be around $8,000 per ounce, but it is not at that price level now simply because of the gold price manipulation which has been widely reported by GATA.