Fundamentals - Inflation Driving Gold?
The problem with this scenario is that the inflation of the 1980's and 1990's did NOT driveGold higher, so clearly the mantra of Inflation driving gold higher is not correct, especially aswe are presently emerged in debt deleveraging deflation, and neither does discounting futureinflation expectations hold up, as the Gold bull market is now into its 10th year with a gain of 400% to date.
Gold Secular Bull Market
From 1980 to 1999 Gold fell for 20 years, eventually it would bottom and embark on a bullmarket, eventually, the signs for this would be not in fundamental data, but contained withinthe price chart as Gold breaks the pattern of corrective rallies followed by the downtrendresuming to new bear market lows. Now some 9 years later gold has corrected the precedingsecular bear market by 50% in time and 100% in price. Therefore gold is not in a new bullmarket which has already contained many vicious bear markets within it as we witnessed lastOctober, so just bare in mind that this is not a fresh young bull market, therefore much of thetalk of waiting for public participation to join in can be discounted.
U.S. Dollar / Credit Crisis
Myearlier analysisof a positive trend for the USD clearly implies given the inter marketrelationship between a two for a weaker trend for Gold. However the risk is that amidst thenext phase of the global financial crisis as the bankrupt banks have far from recovered, thenext stage of the banking crisis accompanied by recognised inflationary panic measures of money printing which devalues all fiat currencies could give a lift to gold.
Quantitative Easing aka Money Printing Hedging
We are in a new world (for the west anyway) and that is a world of Quantitative Easing, themore the governments of the world print money and monetize debt the easier it is for governments to keep printing and monetizing ever escalating amounts of government debt tocover the government budget deficit gap. What this means is collective currency devaluationwhere relatively speaking there appears to be little change but in real terms the flood of money has to be seen in rising commodity prices and other scarce resources, after all thesupply of resources is mostly known and the population of the world is not decreasing so thedemand is known to be on an upward curve. Therefore as long as the central bankers areembarked on the experiment of quantitative easing that should give a lift to gold and other commodities as it increases inflation expectations and therefore inflation hedging using goldand more liquid commodities such as crude oil.
Gold Technical Analysis