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Sunday, January 23, 2011

Where is Gold Headed from here?

Today's winner - Gold sellers (Seriously)

Gold has been hedge for many investors against Global Economic and Currency devaluation for past few decades.  In fact Gold hit a peak during Oil Crisis of 70's and 80's and also during the First Iraq war causing massive oil disruption in the Middle East...

Here is a one year chart on Gold




You can see that current 15% spike in Gold was caused by Greece and Portugal going belly up on their external debts and inability to Borrow. If you breakdown the 15 % rise , its influenced by many factors.

1,  The Devaluation of Euro currency -              Gold spike 4%
2,   U.S government issuing more Debt  -          Gold  Spike 2%
3, The Inflation in China                         -          Gold Spike  2%
4,  the Inflation in India (around 23 %)   -          Gold Spike  1%
5,  Gold ETF's coming onboard across the world (especially in India and China) - 6%

The above issues fed into each other and caused the recent currency meltdown woes.  Silver is still not in parity with Gold over many years because of its Higher  liquidity and it's Reputation as an Industrial Metal rather than metal of Ornamental value.

 Gold spike has been caused by Retirement funds, Investors buying the Gold ETF's when they rushed out stock meltdown.  The Inverse correlation of Stock market and Gold ETF does not apply here because whoemever bought Gold ETF's did not dump it until now and they also kept on buying Stocks.. But there is only so much Gold in the world and most of it is in the private Hands (especially in India, China and Africa).

Lets treat Gold as investment instrument or a Company stock,rather than a metal with an Glittering value..Here is where its headed in next few months when investors or shunning hedge instruments and heading 100% to World Equity stocks..





You can see that Gold cracked through the crucial 50 day average recently and heading towards the 200 day average of 1250$/ounce  ...If technicals are correct you might see a bounce on 1250$ and consolidation..if it fails there and you see more positive economic indicators like Job numbers and Consumer spending we will the Gold has nowhere to go except down ..The next stop would be around 1150$...  if it touches that prices i would be buyer ...Will you?

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