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« Is the US Dollar Overbought? | Main | $1,300 on Double Dip, GFMS Forecasts »

Gold prices nudge $1250/oz, are you prepared?

Gold Chart 09 June 2010 A.jpg

We will kick off with a quick at the chart for gold prices and what a great chart it is. Despite the bears constantly jostling to be the first bear to call a major correction for gold prices to drop back to the depths of the last decade, gold is just not listening and continues to strengthen as the demand for real value grows.

Gold prices popped up above the $1250/oz parapet today to survey the economic landscape before easing back to close at $1237.30/oz. Gold is now poised to to set another new all time high and when it does gold prices will be once again, be in unchartered waters. Also note on the chart that the 50dma and the 200dma are moving up in support of gold prices which is a positive sign. The MACD has just had a nice crossover, again a positive indication for gold. The RSI is heading north and as it is sitting at 62, it still has room for a little more upward movement. The Stochastic is in the overbought zone at the moment but hopefully it can move sideways as gold pushes ahead.

The difference this time regarding an all time high is that gold is already at all time highs in all the major currencies across the globe and is therefore starting to attract more attention in these countries, as nervous investors contemplate the advent of a double dip recession. With the exception of the US Dollar, paper money is losing its reputation as a store of value. The printing presses continue to inflate the money supply thus diluting the value of everyones savings and begging the question of just what is the point of holding cash as a store of value, huh.

The rally in the dollar is not because its fundamentals are sound, it is more a result of other currencies hitting the wall, particularly the euro, which in our humble opinion faces extinction in the not too distant future. The people of northern Europe will not tolerate forever their hard earned cash being transferred to the south in order to preserve a way of life which many regard as unsustainable. Spain has moved in terms of ordering a 5% pay cut for the public sector only to be met by a strike and threats of many more to come. Every time this sort of news hits the air waves investors are forced to reconsider the logic of holding euros and in greater numbers they will diversify into other asset classes, which for now include the dollar. Sooner or later their will be an event which grabs the headlines in the United States, the first state to default for instance, bringing into focus the very same questions that are being applied to the euro now and again investors will not be shy in making the decision to diversify still further. So where will they go? Well we are gold and silver bugs and have been for some time now so we cannot give you an unbiased answer as we are up to our necks in gold, silver, associated mining stocks, options trades and hold no other equities. We can tell you that we have no intention of touching the industrials as we are of the opinion that the broader markets could still drop by around 30% from here, which would take the DOW back to the 6000 level. But thats just us and we do see things through gold coloured glasses.

A snippet from BNN:

John Ing on BNN 09 June 2010.jpg
John Ing

Gold hit a record dollar high above $1,250 an ounce this morning as concern over Europe's economic outlook lifted risk aversion. BNN interviewed John Ing, President and gold analyst, Maison Placements Canada, to get his view on the current situation. John expressed his concern about the UK, France and the USA and also mentioned the geo-political tensions surrounding Israel and North Korea. The investment communities perception of the broader markets was that the recent oscillations resembled a casino as the DOW traded below 10,000 despite the mega bucks that had be poured into the system. Johns near term prediction for gold prices is $1350/oz and that some time this year gold will hit $2000/oz. We cant argue with that as the metals bull is gathering momentum.

Finally, according to our Collins Pocket Dictionary the word fiat as in fiat money is an 'order issued by legal authority, a decree or sanction'. Politicians can order an increase in the money supply but they cannot order gold or silver to double, as its just not possible. Therefore, the precious metals are in a unique position as the only true store of wealth. The move towards gold will accelerate in the coming weeks and months bringing the mania phase of this bull market ever closer, so be prepared for it.

Interestingly, in our dictionary the word fiat comes just above the word 'fib' to tell a lie!

Have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.

The latest trade from our options team was slightly more sophisticated in that we shorted a PUT as follows:

On Friday 7th May our premium options trading service OPTIONTRADER opened a speculative short term trade on GLD Puts, signalling to short sell the $105 May-10 Puts series at $0.09.

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Accumulated Profits from Investing $1000 in each OPTIONTRADE signal 14 May 2010.jpg

Recently our premium options trading service OPTIONTRADER has been putting in a great performance, the last 16 trades with an average gain of 42.73% per trade, in an average of just under 38 days per trade. Click here to sign up or find out more. have been rather fortunate to close both the $15.00 and the $16.00 options trade on Silver Wheaton Corporation, with both returning a little over 100% profit.

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Reader Comments (2)

yes i am prepared. I have been preparing for months, analyzing, calculating and timing this trend reversal. Finally it looks i have rode it right at the top.

I am now locking profits on my position, and watching when could i add another short, probably next week.

June 9, 2010 | Unregistered CommenterDi

I believe in communism, not Soviet communism but real communism. Since I adhere to this principle I firmly believe that governments should not be allowed to print money but instead everyone should be allowed to print money, and in accordance to communist principles everyone should be allowed to print enough money according to their needs however much these may be and should be allowed to print money to contribute to the wants of others who do not have a printer. In this way everyone would become rich, poverty would be a thing of the past and as an added bonus everyone who held precious metals would be overjoyed. If this is not practical then I am sure that helicopter Ben and others of his Ponzi ilk would know how to confetti the populations of the world with their coloured bits of paper Roger Levinson.

June 9, 2010 | Unregistered CommenterRoger Levinson

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