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Tuesday, October 6, 2009

Some Gold Charts and Thoughts

This post will be an update to The Gold Blog. Gold/Silver/GSMs (and a little Oil for good measure) -   Sep 11, 09. Please read this blog first for my fundamental take on gold and the long term charts and counts from which the shorter term counts shown below are derived.

First things first: THIS IS NOT A POST ABOUT TRADING GOLD!!!. I am a gold investor, not a trader. If you are reading this post to get trading advice, skip it and read something else.

TMFSinchiruna and I were having a discussion on this post of his this afternoon. Here is one of my comments:

Sinch, You know I am with you man. And yes, it sometimes feels like you are going insane when you have to make the same argument over and over. (Believe me I know) :). But I appreciate your blog, always have and always will. And I know that there are *many* people in this camp. Thank you my man.

Gold is about value, gold is not about price. We know it is manipulated, we know that it is the enemy of central banks. We have tons of proof that you have provided. But that is all irrelevant.

Because gold is real money in a sea of fake paper. And when all of the funny money gets exposed for what it is (claims on debt with no intention of every being repaid, and only ever able to provide "value" through depreciation). All of these economic shenanigans are increasing the likelihood, if not guaranteeing, a currency crisis in the US Dollar. When will this happen? Who knows. Black swan events are by their definition unpredictable.

So does gold go up to 1500 from here? Maybe
Does it go up to 1100 then down to 800? Maybe
Does it go straight down to 600? Maybe.

If it does any of these things .... ** I DO NOT CARE!!! ***

I am an investor in gold. Short term all is noise. But gold is in a huge bull market because the world runs on paper, and is in control by politicians who will always choose the temporary fix at the expense of long term sound economic decisions. The is why the Dollar is going lower (and like Sinch, I take no pleasure in this). But this is the reality of the situation, and I recognize that.

So I will not time the purchase of real money with fake money. I invest in gold and happily sit through all the whipsaws up and down. And if we are fortunate to get a pullback to $800 or less, *I will be ecstatic!* Because I will get a more favorable exchange rate on real money with fake money.

Sinch, thank you again for all your blogs and the effort you put into them. I truly appreciate them.

So why am I posting some chart updates now?

Because I am bullish on gold technically and fundamentally. There have also been some very bearish counts shown for gold. But I see things differently. So I will show some technical indicators and EW counts from the bullish perspective.

But before we get into that, let me say again I DO ***NOT*** TRADE GOLD. I invest in gold. So if my count is completely wrong, and the bears are right and gold goes below $800, binve is a very happy man. Either gold is heading substantially higher soon. Or we get a nice pullback / buying opportunity.

Gold is about holding value. Gold does not pay dividends, gold does not multiply, gold does not make the world go round. Gold holds value. That’s it. So gold is not a way to get rich. Let’s be very clear about this point. Gold is a way to be NOT POOR. Like I said, it holds value.

So if it goes to $5000/oz, it means that the economic toilet paper we call the US Dollar has been ravaged / devalued by the polices of the US Government, the Treasury, and the Federal Reserve. And you can now buy that much less with the Dollar.

Read what I wrote above in italics.

I have no interest in holding large amounts of "fake money" (US Dollars) to try to time the best purchase of "real money" (Gold). Others may play that game or even advocate it. I will not. I believe a currency crisis in the US Dollar is highly probable, if not inevitable. And maybe there will be warning signs, or maybe there won't be. This is a Black Swan event in the making, which makes the timing by definition unpredictable.

So in my investment account: I am in gold now, and I add on pullbacks.

... end rant

That out of the way, here are some charts for gold

Monthly chart: The monthly chart still looks highly bullish with several intact trendlines. We had an ascending triangle breakout (bullish continuation) with a new high and a new high close. RSI is channeling nicely and bullishly. If you are a gold "investor", then this is the timescale chart you should be focusing on. Gold is very emotional and subject to many whipsaws. The monthly chart tunes out a lot of the noise.

Here is my longer term count (see the link at the beginning of the post for where this count comes from). Some people might say that the correction is not over or too short (bearish). That is a viable interpretation. But the one I show below is also a viable interpretation (bullish). Either way it is an argument of opinions. So look at the chart and make up your own mind.

Short term count for Gold using GLD as an intraday proxy. Not the best approach but good enough to get the general wave forms identified.

Addition 12:30 am Oct 7

Added Silver chart and Long Term Gold/USD Correlation per the request of Tastylunch

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