Gold Market Update

Posted by Clive Maund

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gold15year151214

If we lived in a normal word of fiscal propriety, the falling oil price would be viewed as something to celebrate, as it reduces costs across the board, and should theoretically boost the economy, but we live in an abnormal debt-wracked world where instead fears are surfacing that the plunging oil price will trigger a series of cascading loan defaults that have the potential to collapse the system – already world stockmarkets are buckling. If things really start to unravel it should provide the perfect excuse to bring in global coordinated QE, which we have been moving towards over the past few years, albeit on an ad hoc basis, whose underlying purpose will be to maintain interest rates at zero to stop the system collapsing, and to push the bill for the mess onto the little guy, whose standard of living will be progressively eroded by QE engendered inflation. At what point will they ride to the rescue with their global QE program? – that is a matter of conjecture, but we can presume that they will wait until things get sufficiently bad that people are starting to clamor for it so that it becomes politically acceptable and they can get away with it. 

Coordinated global QE should be good for the gold price in all major currencies, for the simple reason that money will be losing value steadily so that gold, which is real money, must advance to compensate for this. Looked at from this point of view it is remarkable that gold has corrected as far as it has over the past several years.

Right now gold appears to be in a base building process as its rate of decline has slowed as we arrive at what is believed to be the end of its long corrective phase from its 2011 peak. On its 15-year chart we can see that there was very little follow through after it broke down from its long-term uptrend and beneath the support at last year’s lows – one would have expected it to drop quite quickly back to the next important support level in the $100 area – instead it hopped back above the failed support. This lack of follow through is regarded as a positive sign, especially as the dollar has remained resilient in the recent past.

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…..continue reading for more analysis & 12 more charts HERE