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-- Posted Wednesday, 19 August 2009 | Digg This Article | | Source: GoldSeek.com

Dec Gold:  Open= 940.2 High= 946.8 Low= 933.3 Last= 942.3  +4.1

Following Monday’s sharp sell-off, the price of gold has found some support in the low $930 range in the past two trading session.  Yet, the trending pattern in gold prices continues to leave traders flummoxed about which direction will prevail shortly.  From a charting perspective, the winding pattern cannot continue much longer with prices now constrained between two narrowing trend-lines.

For better or worse, gold is likely tied to economic growth.  Without growth, the prospects of demand-led inflation cannot materialize, and it is not yet apparent the U.S. is following the path toward hyper-inflation just yet.  Warren Buffet penned an article today in the New York Times outlining the monetary problem facing the United States.  The amount of debt accumulated in the past six months is more than the combined amount of debt collected in the history of this nation.

While he concludes that the U.S. still needs to be pumping dollars into the system, he is unsure whether politicians will find the gumption to halt the printing presses before the flood of paper destroys the value of the greenback.  The three ways to finance debt are to borrow from foreigners, borrow from U.S. citizens, or to print more money, which leads to inflation.  The easiest path for politicians to take is inflation, as voters tend not to associate the ‘silent tax’ to their elected representatives.

Buffet sees a looming potential for crisis, one that cannot be ignored much longer.  Unfortunately, as we’ve seen, Congress is unable or unwilling to tackle spending on entitlement programs in the past decade.  The welfare-reform measures championed in the 1990s are small change compared to the likes of Social Security and Medicare.  Buffet didn’t explicitly state whether he believed inflation will material rise in the near-term future, but it is known that he has taken large positions against the U.S. dollar in the past and will likely be willing to do so again in the future.

For gold, the chart is winding tighter and tighter, and a breakout on the chart will occur soon.  Traders may want to be patient and wait for gold to break out of this seven-month old, coiling chart pattern, and then follow the herd.  While there are many bullish inflation arguments to be made, the market is not fully embracing those views at the moment as economic data does not show increasing inflation.

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 at tom@altavest.com.  Visit www.altavest.com to request a Free Trading Kit.  Keep in mind that there is risk of loss in all trading.

 

Thank you,

 

Thomas Hartmann

Altavest Worldwide Trading, Inc.

800 994 9566 x109

949 488 0545 x109

Fax 949 488 7625

tom@altavest.com

www.altavest.com

-- Posted Wednesday, 19 August 2009 | Digg This Article | Source: GoldSeek.com

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