Gold Breaks Down Even As Global Monetary Policies Ease

This is an excerpt from an article I originally published on Seeking Alpha on December 16, 2011. Click here to read the entire piece.)

Eventually, the broken clocks calling for another massive sell-off in gold could be right. I sure hope so. I need to add to my current holdings at cheaper prices.

The latest anti-gold excitement is salivating over the technical breakdown of gold below its 200-day moving average (DMA).


Gold breaks below its 200DMA, ending secondary uptrend. Support still holds for now.
Gold breaks below its 200DMA, ending secondary uptrend. Support still holds for now.

Source: Stockcharts.com

…{snip}…

Gold’s weakness is indeed understandable in the wake of a strong U.S. dollar. The index is back to its highs from late 2010, but the rally is getting quite stretched and is due for a rest, even a pullback.


Dollar index's rally is stretching higher and higher...
Dollar index's rally is stretching higher and higher...

Source: FreeStockCharts.com

While gold is wobbling and the U.S. dollar is strutting, nervous central banks and monetary authorities around the globe are moving to ease monetary conditions. The laundry list is long:

{snip}

Clearly, concerns are rising about economic growth and the stability of the global economy. Easy monetary conditions support gold’s value, especially to the extent that more currency gets printed… {snip}

For me, gold does not lose its luster until monetary authorities around the globe are making paper more valuable by tightening. The depth of the current economic malaise suggests such tightening will not occur for many years to come.

…{snip}…

Be careful out there!

This is an excerpt from an article I originally published on Seeking Alpha on December 16, 2011. Click here to read the entire piece.)

Full disclosure: long GLD, GG, net short U.S. dollar, net short the euro, net short Japanese yen, net short the franc

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