Friday, July 2, 2010

Gold's Cup and Handle Formation

Thin trading, headlines promoting fear & doubt, and the increasing casino market mentality has augmented volatility in gold. Gold is a market driven largely by fear and greed towards the end.

The trend managers know the end result of a flagging economy will be more devaluation. As a result, short positions used to control must be reduced, preferably into weakness before the next round of stimulus and quantitative easing. The stock market is giving a very strong signal that cannot be ignored for long.

Devaluation, which is equivalent to the revaluation of gold, used to mitigate the excessive debt burden from the prior expansion is not deflationary. Hyperinflation, and the build up to it, is a product of dire economic conditions and the official currency response to it.

Paper Gold ETF (GLD):

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