GOLD

Investment reporters are falling over one another to find the latest reason for the increase in the price of gold. Bullion on Wednesday traded at an all-time high at $1,049.70 per ounce.

Typically the dollar falls and prices of raw materials rise in response. Yet the dollar was firming for most of the day although we admit it did close weaker. Our point is, however, that the super-strong jump into gold is largely ignoring the wavering greenback.

Investment reporters are falling over one another to find the latest reason for the increase in the price of gold. Bullion on Wednesday traded at an all-time high at $1,049.70 per ounce.

Typically the dollar falls and prices of raw materials rise in response. Yet the dollar was firming for most of the day although we admit it did close weaker. Our point is, however, that the super-strong jump into gold is largely ignoring the wavering greenback.

Given that the yield on the 10-year treasury note has also continued to pile-drive towards 3%, its pretty inconsistent to argue that the gold-bugs are sniffing strong inflationary pressures. There are few tell tale signs of rising prices and aside from the virtuous circle of rising energy and commodity prices in the face of a declining dollar, there seems to be little on the horizon that will upset the inflationary apple cart.

In a post financial calamity world in which economists are discussing a new-new, the conclusion that many are coming to is that gold must be rising in price against the dollar, pound, yen and euro because of a distrust in paper currencies. The core of this argument is the fact that global governments have resorted to the printing presses to bail out broken economies.

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Currency investors are also coming round to the conclusion that the dollar will be abandoned. The performance of the dollar is inversely related to that of the economy. When risk aversion is in place and investors are barging through the exits, the dollar tends to fare well. Signs of a return to economic well being detract from a dollar. Add a layer of stimulus bailout payments to bloat the budget deficit and the pressure quickly mounts on the dollar again.

Physical gold bullion is in increased demand as investors back their bets on further yellow-metal gains in exchange traded funds. The holdings in the SPDR Gold Trust rose to 1,100 metric tons Tuesday, up 2.5 metric tons from Monday. That means that gold holdings were at the highest level since Sept. 23.

We're pretty sure that not everyone is banking on the continued ramp higher for the price of gold. But here's where investors have to tread carefully in the market. Some are likely banking on gains to stall at $1,050 or $1,075 per ounce. That means that bulls who like to set-off mayhem by triggering stops will take every opportunity to create chaos at every opportunity.

Because this is new price territory for gold investors the market really is a huge unknown and there will be occasions when pockets of 'nothing' will be found. Buyers will be forced to scramble to cover bad bets on the wrong direction of gold and be forced to bid increasingly higher prices before they can get out. At times like this you have to watch very carefully. Price transparency becomes very opaque and upwards momentum is not difficult to get underway. 

Going for the Gold
This report tells you seven things that every good metals trader watches.
These are key indicators that will let you clue in to the market's moves BEFORE they happen.
The report also gives you the scoop on four leveraged
exchange-traded funds that let you play the ups and downs of gold and silver - without buying a single future or option.
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The Supreme Council of the Secret Order of Jurojin

Tyche Research