-- Posted Tuesday, 6 October 2009 | Digg This Article
| | Source: GoldSeek.com
Dec Gold: Open= 1017.8 High= 1045.0 Low= 1016.6 Last= 1043.0 +25.2
The past three trading sessions in gold have yielded an approximate $56 range. As of Friday morning, the market appeared ready to break support in the mid-$980 range, possibly forming a small head-and-shoulders formation on the charts. The rejection of lows on Friday then gave more credence to the possibility that a descending triangle was in the works and that traders ought to be watching for a breakout above the downward sloping trend-line starting from the high on Sept. 17. Sure enough, the market broke higher yesterday and closed strong, near the highs of the session. This action set the stage for today’s gains.
Two key events kicked the market higher today; the raising of interest rates by the Royal Bank of Australia and news story out of the British newspaper, the Independent. The RBA made a surprise announcement to raise rates 25 basis points to 3.25%, making it the first country in the G20 to raise rates since the beginning of the recession. It should be noted that the RBA has historically been more aggressive and Australia fared much better that most during this recession, with unemployment at only 6% currently. Still, once the first rates go up, there are more to follow. However, the FOMC has stated is not ready to raise rates and by most accounts, it may be well into the second quarter before the Fed raises rates.
The second bit of news was a story reporting that secret talks are being held between the Gulf Arab states, Russia, China, Japan, and France to strike a deal to move away from petrol dollars towards a basket of currencies by 2018. Though Saudi Arabia and Russia have strongly denied such meetings, the fact remains that such rumored are considered plausible. The state of the U.S. dollar has weakened to a point that talks of moving away from the dollar as the global reserve currency are picking up and are being taken more seriously. All of the nations mentioned above have at one point or another in the past few years discussed serious problems with the U.S. dollar and that the problems cannot continue. Yet the U.S. appears willing to let the devaluation continue, almost forcing the hand of these other nations to do something about it.
Countries like China, Japan, and the Gulf Arab states have huge sums of assets tied up in dollars and simply cannot walk away, as a collapse in the dollar would damage any holdings of cash or debt. This is likely the reason why China has been using its cash reserves to build large stockpiles of raw commodities. The means of protection is through commodity inflation at this stage, which is why the Gulf Arab states may be a reluctant partner to this deal.
Whether or not the move away from the dollar happens in 9 years or in 30 years, the fact remains that the U.S. hegemony is slipping away quickly. Who, or what, power will step into the void is the great unknown at this stage, which is why commodity prices, and that of gold in particular, will find good support in the years to come. Owning, or trading gold, is a means of protection from the unknown territory that lays ahead. Pick your poison, either currency uncertainty or inflation uncertainty. Unless one can rationally explain how the U.S. dollar will escape this crisis of confidence, the trend in gold is up.
Bank of America/Merrill Lynch are forecasting gold to hit $1,500 by 2011 and for crude oil prices to move back above $100 a barrel as emerging market growth creates shortages.
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Thomas Hartmann
Altavest Worldwide Trading, Inc.
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-- Posted Tuesday, 6 October 2009 | Digg This Article | Source: GoldSeek.com
