-- Posted Monday, 24 August 2009 | | Source: GoldSeek.com
By Hubert Moolman
It has been just more than 17 months since gold reached the $1000 level for the first time. Gold has been consolidating since that time in a range of $680 to $ 1000. The price pattern that it formed during that period is actually very similar to the consolidating pattern formed during 12 May 2006 to 16 August 2007. The main difference being: the range of the previous consolidation being shallower at a range of $542 to $730 as compared to the latter. Below are 2 charts illustrating the latter parts of the 2 consolidations. The similarity of the2 consolidations has been highlighted by other market commentators and I have been watching it for a while myself. Look at it and judge for yourself.
chart generated on fxstreet.com
chart generated on fxstreet.com
For me, If gold moves above $972 in this week or next week, stay there and move past the $1000 the first or second week of September, then we have a very accurate correlation between the 2 consolidations. This will open the way for a move to $1300 and then $1700 as a minimum.
The outlook for the gold price is more bullish than that though and in my opinion a move past the previous all time high, in the next PLUS/MINUS 3 weeks will translate into a parabolic spike which will eventually take gold past $4000 faster than most people think. Yes, that is $4000 dollars and I believe it will happen before 2012. Yes it might appear to be a bold statement for some, but that is what I believe the gold price chart and fundamentals are telling me, and until something significant happen that is contrary to this view, it will remain my view.
For me, the big question is, what does this hugely bullish looking dollar gold chart signal for the future? Also, when gold makes this big move, what will happen worldwide? Will it be business as usual or will there be a major crisis or more than one crisis. For my view on this please check my blog, where I have posted some articles on this topic and will continue to do so as events unfold.
What it does tell me is that we are facing an international monetary crisis. The outlook for the world’s so called reserve currency (read the world’s currency) as measured in gold is bleak. It signals hyperinflation for more than just the United States of America. There will be hyperinflation, for me that is a certainty. The only thing uncertain is the period of time. The period from1979 to early 1980 was actually a very similar period to what we are facing; however, it could very well have just been a prelude to the death of paper currency which we are possibly facing today.
When I say hyperinflation then I am here referring to this “definition”:
IAS 29 – Financial Reporting in Hyperinflationary Economies states the following about hyperinflation:
Hyperinflation is indicated by characteristics of the economic environment of a country which include, but are not limited to, the following:
(a) the general population prefers to keep its wealth in non-monetary assets or in a relatively stable foreign currency. Amounts of local currency held are immediately invested to maintain purchasing power;
(b) the general population regards monetary amounts not in terms of the local currency but in terms of a relatively stable foreign currency. Prices may be quoted in that currency;
(c) sales and purchases on credit take place at prices that compensate for the expected loss of purchasing power during the credit period, even if the period is short;
(d) interest rates, wages and prices are linked to a price index; and
(e) the cumulative inflation rate over three years is approaching, or exceeds, 100%.
However, I prefer to amend this definition by placing gold instead of the highlighted words. I do this because the nature of this hyperinflation will be global, so most if not all paper currencies will be affected. So if you read the definition again (inserting gold), you will probably understand, as I do, why gold will reach that $4000 and much more in an international monetary crisis.
There are many other indicators that can help us to make sense of the possible nature, extent, timing and influence of the monetary crisis. These are indicators such as the gold/Dow ratio, the outlook for gold equities, us dollar index, gold/silver ratio and more. Hopefully we can cover some more of this and hyperinflation in future articles.
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May God bless you.
Hubert Moolman
You can email any comments to hubert@hgmandassociates.co.za
-- Posted Monday, 24 August 2009 | Digg This Article
| Source: GoldSeek.com
