In order to keep commentary brief and concise, the heart of the gold trade is becoming apparent very quickly.There are grounded fears that the bond rating of the United States will be downgraded.This is causing selling pressure on the US dollar and turning flight-to-quality buying back to gold.Just as stocks will drop when ratings get chopped from AAA to something lower, the US dollar is trending lower now and traders expect the ax to fall.
The Obama Administration has racked up more debt in four months than in the entire history of this nation combined.Love the president’s policies or not, the simple fact is that the US will have to pay more to borrow money.That is money we do not have and it will cost hundreds of billions of dollars per year in interest alone for decades to come. Unfortunately, the Administration does not see fit to enact pro-growth, limited government spending policies to help begin to dig our way out of this deepening hole.
Other nations and investors will eventually stop lending money or slow their pace of lending, forcing our nation to simply create money in our limitless ability to switch on the printing press.This creates inflation, causing prices of goods to rise in order to maintain relative stability with the falling value of the dollar. No matter how one cuts to the matter, the foreseeable direction of the US dollar is lower, inflation higher and gold higher.‘Quantitative easing’ is the policy of the Fed and the Administration and they will not be quick to raise interest rates to sop up the excess liquidity.It is a grim outlook, but a grounded one.
The downward correction in gold prices was broken earlier this month and prudent trading requires following the new trend: upward.Upside targets now lay at $948 was met and exceeded today (now becoming support) and $970.Support comes in at $948 and then back at $935, and $928.
Review charts on these markets here www.britefutures.com. Remember that futures and options can be used for bullish or bearish positions; feel free to contact me to discuss trading strategies. Each contract/option = 100 ounces, a $1 move in a futures contract = $100.
To open an account and receive trading recommendations on gold futures or options contracts (also stock indices, energies, currencies, etc.), or to use our online paper trading service BriteTrak,contact me attom@altavest.com. Visit www.altavest.com to request a FreeTrading Kit. Keep in mind that there is risk of loss in all trading.
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