I told you that I am a dollar-bear and commodity bull many times. Two days ago, gold broke the $1,000 an ounce barrier, from $950 a week ago. From November 2008 through February 2009, gold rose from around $700 to nearly $1,000. The ensuing consolidation ended last week and with the breakout above the upper boundary of this triangle, a clear buy signal is generated.
The momentum is bullish and perhaps there is a lot of room for additional price gains. Sentiment indicators point in the similar direction. The next immediate target could be $1,100 – another 10% upside, but it is just a minimum target. If you take a step back a bit and look at a longer-term gold chart, you would know the significance of a clear break above the resistance zone around $1,000 level. It signals the end of huge consolidation and the start of the next medium term uptrend.
If we going by this count, the target moves to $1,300 and even then, this could just be another interim target, partly because of weaker US dollar and possibility of higher inflation. Government debt, as a consequent of financial and economic crisis, is going through the roof, not just in the US but all over the world. World-wide central banks are printing money like there is no tomorrow. The US government has made $11.6 trillion in financing commitments, many of which will saddle us with debt for generations – some of it forever.
Gold supply is stagnating or even slightly shrinking. The demand of this yellow metal is too strong despite the metal’s price rise since 2001. This is because it is getting ever more difficult and expensive to get gold out of the earth.
So, now we have the confluence of important technical breakout and strong fundamentals in place, I expect the long-term bull market to continue.
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