G&G Associates Tax & Financial Consulting
Gold Breaks $1,000 an Ounce; Now What
Dear G&G Readers,
Yesterday, gold broke the $1,000-an-ounce barrier, after rising from $950 per ounce last week.
It was the precious metal's fifth run-up to the round number. And now there are many signs indicating that yesterday's decisive break is of major importance.
From November 2008 through February 2009, gold rose from around $700 to nearly $1,000.
The ensuing consolidation took six months and ended last week. This consolidation has the form of a triangle, which typically confirms a trend.
With last week's strong breakout above the upper boundary of this triangle, a clear buy signal was generated. And that explains gold's move above $1,000. Now, Momentum Indicators and Price Targets Point to More Gains Ahead.
The high momentum of this move is bullish. In spite of this healthy thrust, medium-term momentum indicators are not yet overbought. In my opinion, that means there is a lot of room for additional price gains.
So how high could gold go from here?
Well, the width of that triangle formation can be used to calculate a minimum price target. It's around $1,100.
A 10 percent move may not sound too exciting, but it's just a minimum target. Plus, there is a very important additional message coming with this price target.
A Rise Above this Resistance point and makes It Extremely Bullish
The previous retracement movement can be seen as nothing more than a typical correction taking place during a long-term uptrend. A break above its upper boundary around the $1,000 level signals the end of this huge consolidation and the start of the next medium-term uptrend.
The minimum target of this larger formation amounts to $1,300. And since gold is in a long-term bull market, I see even this area as just an interim target.
Longer term I expect much higher prices. Here are the reasons why:
- As a consequence of the current financial and economic crisis government debt is going through the roof — not just in the U.S., but all over the world.
- Worldwide central banks are printing money like there is no tomorrow.
- Gold demand is rising due to rising wealth in emerging economies where the yellow metal is still favored as a store of value.
- Gold supply is stagnating or even slightly shrinking — despite the metal's price rise since 2001. This is because it's getting ever more difficult and expensive to get gold out of the earth.
- Finally, central bankers who were very eager to sell government gold at much lower prices a few years ago are getting increasingly reluctant to keep doing so. Emerging market central banks are even buying.
So with this important technical breakout now behind us, and these fundamentals in place, I expect the long-term bull market to continue. Much higher highs are very likely.
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Tax & Financial Consultant, RFC
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LEGAL NOTICE: This work is based on SEC filings, current events, interviews, corporate press releases and what I've learned as a financial consultant. Nothing herein should be considered personalized investment advice. It may contain errors and you shouldn't make any investment decision based solely on what you read here. It's your money and your responsibility. Also, please note that due to our commercial relationship with Publc Gold, G&G Associates may receive compensation from a membership purchased at www.publicgold.com/gngpreciousmetals.