Gold & Silver: The Smack Down Is Over

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US Dollar Chart

Dollar Commentary

I am projecting that the USD falls to the 65 area on the above chart, likely in the Sept-Nov timeframe. Gold has started a huge devaluation of the dollar. The reason gold has been hitting highs is because of a serious loss of confidence in the world’s fiat currency system, one that is gaining momentum by the day.

I see no reason to alter my target of 65. Recent economic data has caused one economist after another to steadily trim their growth estimates. The odds of a double-dip recession, or worse, are rising.

Debt remains front and center, and committees of congress will try to work out an agreement. The problem is congress knows they need to diet, and they promise to cut back on their calorie intake after every “next election”. The situation is very serious, and a lack of credibility on this matter could create a confidence disaster. Gold’s skyrocketing price is offering politicians a warning that their actions are failing badly.

Bank of America Death Chart

One of the most important lead indicators for the dollar and the economy is the bank stocks. Bank of America is the largest bank in the United States. This chart looks like the company is going to be delisted. It is an ominous sign for the banking industry, and the dollar.

Some investors bought Bank of America on the news that Warren Buffett bought the stock. You need to ask yourself what kind of deal he may have really gotten, versus the deal you might be getting, if you buy the stock in the open market.

Also, the “breakout” exhibited by the stock on the supposedly great news that Bank of America is in a desperate situation… is already a technical failure! I expect the dollar chart to mimic what you are seeing now on the price charts of the nation’s largest financial institutions.

Gold Super Highway Chart

Gold Analysis:

Supply and demand are like truth detectors. Fresh gold supplies are mined and brought to market, but the rate it occurs at is physically limited. Compare the growth in the ability of miners to supply gold to the refiners with the ability of a central bank to print paper currency and decide which item holds the real value for you.

The public is really just barely aware of the fact that fiat currencies are on fire. There are few places for people to run to outside of the fiat currency system. Gold offers liquidity and is fairly portable. What is most important right now is that gold has burst through the upper window of the previous uptrend. It has entered what appears to be, technically, a parabolic superhighway.

The gold overshoot of the up channel has been truly spectacular. It took place around Aug 8th, and I then projected that gold would enter into what I termed, “the smack down zone”.

Gold Smack Down Chart

This chart is a magnified view of the price action I projected would occur at the entrance to the superhighway price channel. This price correction could be your last opportunity to buy before gold goes to much higher prices, and does so at a much faster rate of rise.

I continue to look at the top of the previous upper channel, which is approximately $1700, for the end of the correction target zone. This hard two-day correction feels like a clean-out type of move; a sort of vicious good-bye to gold’s price chasers. I have urged my people to add to gold positions this week, because the smack down zone is also likely your “last chance to buy zone”!

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