Gold Chart Walk 2012

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US Dollar Key Resistance Chart

Analysis

Unlimited government requires unlimited funding. The unfunded liabilities of the USA are staggering. Over the next 20-25 years there is probably a gigantic $75 trillion unfunded liability problem for the US government. Think of the move in gold against the dollar with a debt of $15 trillion. Can you imagine the action in gold with a debt five times the current size?

The United States could be headed towards decades of dollar devaluation. With all of the problems in Europe, why isn’t the euro hitting new lows? Why can’t the dollar mount a real rally, instead of this tiny bit of strength?

The answer is that the dollar isn’t really very strong at all. If America goes into a crisis like you’ve just seen in Europe, the fall in the dollar could dwarf the euro’s fall, because America is the largest debtor nation in the history of the world.

The nature of all fiat currencies is to be competitive, with each currency group looking for an advantage in trade, and more importantly, an advantage in debt relief for the governments that issue these currencies. Fiat currencies are designed to be depreciated over time. Buy Gold in this time of gold price weakness, because your opportunity won’t last forever.

Euro Commercials Chart

I’d like you to take a look at the despised euro. The euro is not breaking new lows, and the dollar is not exploding to record highs. The commercials group is now heavily buying the euro. Could this mean the euro is actually headed higher?

The euro often moves in line with gold and I think this is an opportunity to build your holdings of gold and silver, rather than betting one fiat currency against another. I am doing it now in most of the precious metals sectors.

Gold Twin Tables Chart

Market correlations are very important to determine where markets might be headed into the future. Strong sentiment indicators like commercial buying in gold are currently telling a very bullish story.

For timers, commercial buying in gold acts more as general guide than as a laser pointer. Commercial buying doesn’t mean that the trend is about to reverse, and large drawdowns can greet investors who buy as the commercials buy. The key point to remember when studying commercial buying is that assets bought when commercial traders buy them can usually be sold at a very good profit, but you need to have patience.

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