Wednesday, August 3, 2011

Trader Dan: Gold Forming a New, Steeper Uptrending Channel

For those who have not read Dan Norcini's gold update from yesterday afternoon, please do so.

Norcini points out a clear steepening of gold's up-trending channel beginning approximately in January of 2011.

Since late 2008, gold has been rising in a strong and steady fashion within the confines of a channel that I have marked out on the weekly price chart. As mentioned previously, its rise has been orderly and solid unlike silver which burned itself out by rising too quickly at one point earlier this year and is just now attempting to re-establish a solid uptrend.
Since the year 2011 has begun, a new and steeper price channel appears to be forming as the fundamental factors that have driven the metal onto new record highs show no sign of ameliorating; if anything they are growing worse.
These three factors are:

(1.) Sovereign debt woes out of the Eurozone
(2.) Raging inflation across China and other parts of Asia
(3.)  Anemic economic growth in the US guaranteeing accomodative monetary policy for the foreseeable future

One can add to this a 4th factor which is the enormous amount of indebtedness being heaped upon the citizens of the US by politicians which is sinking the nation into an inescapable mire of perpetual debt slavery and has now set the stage for an inevitable downgrade of US debt worthiness. It seems to me that this recent travesty of a spectacle, in which lawmakers actually cheered plunging the nation further into bondage has brought home the gravity of the situation to an increasing number of citizens/investors.
In the West this has resulted in a loss of confidence in the monetary authorities and political leaders which has resulted in surging demand for gold as a safe haven and vehicle to protect the earning power of accumulated wealth. In the East it has led to gold buying as a hedge against soaring food and energy costs. All of this has now come together and is feeding the bullish sentiment for the metal.


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