New Gold Target: $2330

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US Dollar Against Gold Chart

Analysis

How safe is the dollar, really? Each social safety net program began the size of a mouse and grew over time, into what is now an elephant on growth hormones. Few of these programs have ever been phased out, so we rely on the printing press more and more, to keep the spending going.

There’s not enough tax revenue collected to pay all these bills. The budget deficit for 2011 already is $1.3 trillion. More big government “solutions” have been passed in the last couple of years, including nationalized health care. Rather than going away, these deficits may be just starting to greatly accelerate.

Four years ago, the deficit was less than $250 billion. Now it is $1.3 trillion, a fourfold rise. What will it be four years from now?

When considering gold to protect yourself from this madness, ask yourself what paper currencies laced with debt are really going to be worth in the next couple of years. When you do an honest accounting of debt in the western world, the debt is beyond the point of no return. Money printing seems be the new “American Way”.

The above chart shows how steadily the dollar is falling against gold, and suggests the move has a long way to go. The rallies in the dollar are almost invisible. Gold, purchased on price weakness, remains the only sensible solution for investors.

Gold COT Chart

Gold Super Highway Chart

Analysis

I have highlighted commercial traders, and the historical significance of their strong buy action. Such action is quite rare, and may carry important implications for the upside of the gold price. I’m looking for a slight pull back here, and then it should be off to the races into the large up channel, with an intermediate term target in the $2330 area.

Once these commercial buyers step in, the force of the move to the upside tends to be very powerful. Within a couple of years, the gold price can move well over 100% to the upside.

I am projecting gold at $2000 by the end of 2011 or early January, 2012. Please make a note of my gold COT chart analysis price target, which is $2330 as of July, 2012.

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