- The fundamentals for gold are super strong. Don’t let the financial MSM deceive you. This year we should see the start of the phase transition event, the parabolic rise of gold price to stratospheric heights in the years ahead. US$3500/oz in 2012 is not a pipe dream! Gold is heading towards US$10,000/oz in the next few years!
Fractal Analysis: Gold to $3,500 this year still likely despite crash!
Technical analysis sees the overall strong upward trend in the gold price very much intact despite yesterday’s big falls in gold and silver prices.
As we have discussed in a previous article, our Fractal Model suggests the wave for Gold in US Dollars will sweep up into the $3500 to $3600 area into the mid-year time-frame. The leading edge of that time-frame begins in May and extends out for a few months. A potential for Gold to spike to a $3900 extended fib level exists. Like all parabolic moves in Gold, the late stages create the biggest price movements. Personally, I would be happy with a huge Gold run up to the $3200 level.
Our description of the Gold tsunami wave to come this year as a result of the huge wave of Dollar Inflation initiated by the $600 Billion US Dollars sent to Europe back in December of 2011 is beginning to be noticed by the markets. This is a very important “point of recognition.”
The fundamentals for this wave in gold are as follows:
1. The massive world debt load demands that we either see a deflationary depression; or that we devalue the debt by devaluing the paper currencies. The politicians have chosen to dramatically devalue the paper currencies.
2. The Federal Reserve is the only Central Bank with the right to print to infinity, thus, US Dollar printing will remain the leader going forward.
3. Gold moves almost directly inverse to the value of the Dollar. Thus, the acceleration of Dollar Devaluation will drive the price of $Gold in its accelerating parabolic climb. (The USD Index has little to do with the “value of the Dollar” as we will soon show via “The Fractal Dollar” in a different writing.)
4. This current leg of Dollar Printing via in the $600 Billion Dollars sent to the European Central Bank in a swap arrangement back in December of 2011 is just the start of this wave with Dollar printing demands to increase the debt ceiling, to cover losses by Fannie and Freddie, to continue to pay extended unemployment insurance benefits, and so on. Yet, the “lowly sum” of $600 Billion of Dollar Printing via QE drove Gold up to the $1920 level, and that much kicked off this round.
5. Debt monetization via QE sends no new Dollars directly into the economy since the newly printed Dollars go directly from Uncle Sam’s hands to cover the item listed, above. Thus, these newly printed Dollars only “replace Dollars” that were never allotted for all of the above items and other responsibilities like the unfunded Social Security Funds and Federal Pensions. As such, the economy is not directly helped by the new Dollar printing. As the economy continues to deteriorate it demands an acceleration of new Dollars to be printed. It’s like a cat chasing its own tail.
6. The US needs to devalue the US Dollar to the point that the debt is devalued to manageable level. The Dollar is devalued against “relatively constant valued Gold”; just like the late 70’s when Gold went parabolic. Unfortunately, the massive amount of Dollar printing this time around could not be done via the loan multiplier system where the new Dollars go directly into the economy. So Dollar creation via direct debt monetization, QE, had to be done after the loan multiplier system was “blown out” in 2007 and 2008.
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