June 8, 2009 – Gold has climbed higher as expected. Both precious metals now look ready to make new multi-month highs, but it is becoming increasingly clear that the gold cartel is pulling out all the stops to try keeping gold from climbing above $1,000.
Therefore, the battle for $1,000 will not be easy. But gold always wins – eventually – which explains why I have been recommending patience in recent letters.
Gold will climb higher as long as the Federal Reserve continues to pursue policies that debase the dollar (e.g., maintaining negative real interest rates, bailing out banks, providing unlimited funding to the federal government for its uncontrolled spending, etc). There is no indication that the Fed is about to change its ways, and as a result, we should continue to expect higher prices for both gold and silver. It is not surprising therefore that the charts are presenting a very bullish picture.
Turning first to the accompanying gold chart, I am presenting gold’s short-term chart. Readers know I like to work mainly with long-charts as they illustrate the important point, namely, the long-term trend, which of course remains pointing up for gold (see the chart in the last letter, for example). But I am using the short-term chart to show how gold has gone from strength to strength over the past several weeks after taking out the short-term downtrend line (red line on the chart).
The ‘head & shoulders’ pattern that I have been highlighting in recent letters and in my commentaries on the GoldMoney site commentary is still developing as expected. This pattern will be complete when gold breaks above $1,000.
As I noted in the last letter, this “event looks likely soon – probably some time in June.” I’m sticking with that forecast, despite the attempts by the gold cartel to keep gold under that critically important level.
When gold climbs above $1,000, it will be a wake-up call for the entire world. Given that gold is the ultimate ‘canary in a coal mine’ when it comes to monetary events, a price above $1,000 will cause a rush into gold by people who have not been participating in gold’s bull market, which is most everybody. Gold is clearly under-owned.
Gold’s climb above $1,000 may result in a similar outcome to the Dow Jones Industrials’ climb above 1000. The Dow Industrials first flirted with 1000 in the late 1960’s. This average then went sideways in a 600-1000 trading range until 1983. That year the DJIA finally broke above 1000, and just kept climbing. The DJIA never looked back. I think the possibility is very good that gold will do the same thing.
The gold cartel probably thinks so too. Their concern may explain why they are going all-in to stop gold. They have been fiercely fighting gold’s advance, first as we know at the $912 level and then all the way since then as gold has climbed higher to its present level.
We see the intervention by the gold cartel in the huge increases in open interest on the Comex. We can also see it in the way gold trades and in the same techniques that the gold cartel has been using for years, for example, hitting the paper market with heavy selling after the physical market in London closes, painting the tape by selling into the thin after-market when the Comex closes before trading begins in Asia, by shorting into the buying of trend-following hedge funds and commodity trading advisors and covering those shorts when these fund managers reverse their positions, etc.
The gold cartel is of course bad news, but it hasn’t stopped gold from rising eight years in a row (it’s up this year too, its ninth year). So don’t let the gold cartel cause you to take your ‘eye off the ball’. We must stay focused and continue to accumulate gold, month-in and month-out (see the Strategic Portfolio, Gold/Sivler Ratio – 8 June, 2009).
With a dollar-cost averaging program you are saving sound money as you accumulate gold for your Strategic Portfolio. It is sound money that has appreciated in dollar terms by 16.3% per annum on average over the last eight years, making gold one of the world’s best performing asset classes in this decade.