We have been looking for gold to make a higher high in recent articles and today we got our wish as gold popped up above the $900/oz mark and finally closed at $898.30 for a gain of $41.90 on the day. The Gold Bugs Index also joined in the fun when it added 25 points to close at 304.03.
As we can see from the above chart gold has pushed higher, which is great news for all of gold’s fans. We would now expect gold to rally to about the $930/oz level at which point the profit takers could well pull their cash out and go back to the sidelines. Also note on the chart that the MACD has formed a golden crossover. This is when the black line moves in an upward motion above the red line, this movement is usually a very good sign that gold is about to go higher, however, it does not work every time.
This chart depicts the lower highs that gold had formed and today it made a higher high by closing at $898.30:
The US Dollar put in erratic performance trading as high as 86.6 but a late bout of selling dragged it down to close at 85.60. At one time in the New York session they were both heading north at a decent pace but the dollar failed to hold onto its gains. We could now be at the juncture where gold heads north regardless of the dollar which would be a terrific sign of strength for gold. Then, if the dollar resumes its trek to the basement, as we think it will, gold will move to much higher levels in comparison to the dollar. Also keep in mind that the value of gold is now close to, or above, it’s all time highs when compared with other currencies.
Finally a word from Jim Sinclair:
With all this bailout talk, another word is starting to make it into the vernacular...Inflation!!! Before the Geithner confirmation hearing, former Fed Chief Paul Volcker, who I like to call "the Real Maestro," gave a short testimony to vouch for tax dodging "Turbo" Tim Geithner. (He used Turbo Tax to do his returns.) The most newsworthy thing said were the few lines Volcker slipped in about his concern about inflation because of all the bailout money being created for the banks. No news organization I know of reported that little tidbit. Volcker's fear of inflation should have been the real headline for the hearing…
If we are in a deflationary period now and gold is performing well then what will gold do if this deflation is followed by inflation and just maybe hyperinflation?
Please give us your thoughts!
Have a sparkling weekend.
Stay tuned for updates in this fast moving market…
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