Gold will hit an all-time high in days (updated) (again)

Yes, you read that right, and, no, I haven't been smoking the dried banana skins again. I am as close to certain as one can be that gold will in the very near future - perhaps in a matter of weeks or even days - make a brand new all-time high.

I can almost smell the scepticism through the inter-tubes. 'Where's GM, the real TA master?' I hear you cry. 'JdA doesn't do the analysis - get GM back.' Well, if you must know, GM is sadly indisposed, following a difficult conversation in which I requested permission to be unleashed on the charts, and he exhibited some initial reluctance.

Moving on swiftly (before he can bite through his binds), here are your charts. They all track the London gold fix for the past 12 months. As you can see, each makes quite a compelling case for gold hitting a brand new all-time high very, very soon:

UPDATE (21/1/2012): By the wonders of the internet, these charts will continue to update themselves automatically. So interested readers can check by from time to time to see how long it actually did take for gold to reach its new all-time high. The reference point for this article (and thus my call) is 19 January 2011. As you can already tell (as of 21/1/2012) it's not going especially well... Sigh...

UPDATE (27/1/2012): I'm over-joyed. My first call on Screwtape, and it was a blinder. Gold did indeed just make an all-time high, just seven days from posting this article. For detailed info, please see the comment section. But please remember that JdA is NOT a soothsayer, a psychic or a witch...

Now, you might think that that's cheating. Or you might assume that the average Screwtape reader doesn't do a great deal of gold buying in Złotys or Forints. You'd be right on the latter point (although we are quite big in Sweden, apparently), but cheating this is not.

You see, most of the main arguments used by the 'gold is in a bubble' proponents of this world are based on the gold chart in US dollars. I won't reproduce that chart here, because you're all familiar with it. But it's certainly true that it can look a bit 'toppy' when viewed from certain angles (although anything but toppy when viewed from others, of course). However, TA - especially TA conducted in one currency only - is only part of the story. We also need to factor in events, and we also need to consider sentiment.

In other words, how are worldwide investors, big and small, viewing gold at the moment? Does gold still have its old magic? The charts above suggest to me that the answer is unquestionably, 'yes'. It's no coincidence that the four currencies I chose are all in trouble, for a range of reasons. And so Serbian, Hungarian, Polish and Czech investors who have bought gold have had their finances relatively protected over the last six months. For them, gold has acted exactly as it should - as a safe haven. And those who bought in earlier will have made a pretty healthy fiat profit thanks to their foresight. In case you're still questioning the 'gold to make new highs in days' title, I will point out that for each of these currencies gold only needs to increase in price by between 1.5 and 2.5% to do so. Considering the general worldwide momentum that is behind gold as it comes off its low, this does not seem to represent much of a challenge.

But I can't deny that these markets are not especially large. And these currencies are in more trouble than the dollar, the pound, or even the euro. My point is that the weakest (genuinely independent) currencies will have the flight to gold first, and these will be followed by the next weakest, etc. You might think that I have chosen deliberately obscure examples to hammer home my point. Well, bearing in mind that I said the Koruna, Złoty, Forint and Serbian Dinar only have to shift by 1.5 - 2.5% to reach new highs, how far does gold priced in some of the bigger boys have to move?

To make a brand new all-time high, the price of gold in Euros only needs to rise by around another 5.2%; in Swiss Francs, 4.5%; and in Norwegian Kroner, 4.3%. Perhaps surprisingly, the British Pound Sterling is doing better, as gold needs to rise 9.6% to make a new high. This reflects the fact that the GBP has become something of a shock safe haven in recent months, as investors have rapidly exited the Euro.

Now before anyone tries to point out that a lot of this is a function of currencies devaluing against the dollar, the currency in which gold is bought, I am fully aware of this. But my point is bigger than that: those who like gold as an investment often point out that it is an excellent hedge against currency devaluation. But this confidence has taken a knock in recent months, as the shine of gold's safe haven status has appeared to tarnish, and the dollar has emerged as the safe haven par excellence. What the above data show is that gold remains an excellent hedge against devaluation, and the fact that the devaluation is against the dollar rather than (as expected) against gold itself is neither here nor there if your money is in one currency and you have to buy your commodities in US dollars, as is the case for most of the world.

So what of the dollar itself? Well, the poor old USD (thanks to its strength) still has to lose another 15% to make a new all-time high in gold. US dollar sentiment appears to be declining, however (with the USDX falling from 81.8 to 80.15 in four trading days); this should make its gold price climb climb easier. And if US dollar sentiment really did fall quickly over the next month, then I admit that my prediction of brand new all-time highs in a range of other currencies may well be put off a little longer.


The Big Setup said...

Inflation or deflation GOLD will go up anyway. The dollar is doomed as they print until they end of time...or the dollar.

The Big Setup said...

NEW YORK (CNNMoney) -- Republican presidential candidate Newt Gingrich is calling for the United States to think about returning to the gold standard.

They are starting to jump on the Ron Paul bandwagon..

The Big Setup said...

On Yahoo..GOLD is going to go UP...
The Federal Reserve is likely to step in with $1 trillion worth of easing that could be announced as soon as this month, according to a growing consensus of economists who see the recent uptick in economic growth as unsustainable.

Warren James said...

@JdA, yes - agreed. If the USD index sinks a little with a strong gold rally then I think we'll see some hot AUD:GOLD action.

FOFOA did something unusual and commented on the price of gold when it reaches the old 1980 inflation-adjusted high ($2,333) ... which could be an interesting high if it hits in 2012. I'm interested because every man and his dog (or HFT bot) will likely be shorting it at the 'top'. So far though, physical price seems to be contract price - especially as in silver as we can see with Sprott's latest purchase:

Brian O'Flanagan said...

Love the headline JdA! Very King World News-ish.

KJ said...

too modest, paper gold price should double or triple within 3 to 6 months, along with paper silver (von greyerz)...or paper gold will not only triple, but rapidly triple! (embry)...

let's not forget shortages of silver (von greyerz, london trader, leeb, butler)

naked shorts (london trader) - could it be possible there are no naked shorts in silver?

Dr Durden said...

Yeah, but how much has gold increased when priced in ......


Slightly OT, but mostly on topic. I've been poking around here for awhile and it's nice to see some common sense. If this site ONLY exists, however, to chase the PM bugs around like children, then I won't be staying cause there's no point and I gotz stuff to do.

However, the nonsense HAS to stop! It's driving me shitbananas. Ev-re-freee-kin day I stop buy Turdland, it's "EE attack" this and "smackdown" that. Seriously, I get the manipulation bit. I see the COT reports. I'm down with that sickness. But you have to be fucking kidding me if you actually believe that Blythe and the goof troop is "capping" every $.19 advance in silver and every break high in gold.

It's like a comedy reel, now. And what's really funny about it? These numbnuts don't realize that the "EE" is the one they should be thanking for suppressing the fiat exchange for metal at absurdly low levels.


And SGS? Lulz, what a dickwad. I got the IP ban long ago for talking common sense over there. It's like being wrong about everything is that racist Canuck's sick fetish.

Ok, I'm better now.

I'm still holding ZSL until I see some major divergence in the markets. Would kill for a 60:1 silver/gold ratio again in the intermediate term.

GM Jenkins said...

Something I've puzzled over is how technical analysis can "work" for different currencies and a good measured in those currencies at the same time. E.g. if gold in kroner is completing a cup and handle while gold in zloty is completing a head and shoulders, are there any degrees of freedom left for the kroner vs. zloty chart?

Speaking of degrees of freedom, um, I was ... tied up this morning and JdA was kind enough to complete the TA post I had in mind.

Anonymous said...

Hey Dr D. - Glad you like the site. And be assured, our purpose is not to chase the PM bugs, but rather to investigate what they say. If there's merit in it, we say so. If there isn't, then we point that out too. Unfortunately, there's a huge amount of nonsense being spoken about the silver market at the moment, and it's taking up quite a bit of our time to dispel it. But it's worthwhile work, I hope you'd agree.

Regardless, we have plenty of other articles and TA (some of them very bullish) which don't even mention the fact that SGS is a racist, ignorant lie-peddler.

Warren - Yeah, the AUD has a stonking 15.75% to rise before it makes a new gold high - more than the USD. This perhaps fits more into the smart money strategy: pick the currency that's the lowest in gold-price terms, and chances are that's where you'll see the quickest rises.

mortymer said...

Being originally from the CZK area it is a good post. Thanks.

Could you please look at my research and check if there is something to debunk?

The list of my latest found posts is here on 2nd blog:
(links at page)

A2/Prelude II .
US Gov documents and meetings

1968 March 17 - 145. Editorial Note
1969 March 14 - 191. Editorial Note
1973 February 6 - 3. Conversation Among President Nixon, Secretary of the Treasury Shultz, and the Chairman of the Federal Reserve System Board of Governors (Burns)
1974 March 6 - 61. Note From the Deputy Assistant Secretary of State for International Finance and Development (Weintraub) to the Under Secretary of the Treasury for Monetary Affairs (Volcker)
1974 April 25 - 63. Minutes of Secretary of State Kissinger's Principals and Regionals Staff Meeting
1974 May 9 - 64. Memorandum From the Under Secretary of the Treasury (Bennett) to Secretary of the Treasury Simon
1974 June 4 - U.S. Position on Gold
1974 December 13 - 79. Memorandum From Henry Wallich
1974 December 18 - 81. Memorandum From Edwin Truman of the Federal Reserve System Board of Governors Staff to the Chairman of the Federal Reserve System Board of Governors (Burns
1975 May 15 - 85. Paper Prepared in the Department of the Treasury
1975 June 4 - 88. Memorandum From the Assistant Secretary of State for Economic and Business Affairs (Enders) to the President's Assistant for Economic Affairs (Seidman)
1975 August 28 - 97. Memorandum From the Chairman of the Federal Reserve System Board of Governors (Burns) to President Ford
1975 August 28 - 98. Memorandum From Secretary of the Treasury Simon to President Ford

Anonymous said...

Hi Mortymer,

I'm glad you liked the post. Being from the CZK area, what's your views on the potential for the Czech Republic to join the Eurozone? Where would you prefer to keep your money: in Koruna, Euro, Dollar, or gold (or elsewhere)?

Thanks for the links. I'll go through them and see what I can add (if anything :-) )


mortymer said...

Here is the more up-to-date list:

both my blogs will share the same later.

The things is that it contains sooo much valid info that it blows my mind.

Potential? My view?
- is a sane CB
- the governor is reasonable person, his few papers are more than interesting
- tried to contact him but no response of course
- CR sold its gold for German papers (the Another alignment I suppose - I still deeply disagree with that move, there were some national treasure rare coins in the tons we just gave away under who knows what condition, but beat me)
- Economy very open, there is a saying "where Germany goes, Czech rep. goes" WE are jsu an economic appendix.
- The position of the country is that it is either East or the West, our corrupted politicians decided to go with USA for who knows what reason - good that the US radar base close Prag (80km) was not built.
- Economy vibrant, flexible, but also very active grey market (due to top politicians being good examples & some policies/decisions just questionable)
- So given the above, there is a game between parties about the CZK and a vote to go to Euro area.
- Slovakia did and that is the benchmark.
- Yes but not now.

The last q of yours...
-I voted 3 times, once with my heart, that lead me to vote with my feet and then of course I voted with my wallet. :o)

Anonymous said...

So, as mentioned in the update, gold just reached a brand new all-time high, in Serbian dinars.

9 Sept 2011: 137,979.01 per ounce
26 Jan 2012: 138,627.15 per ounce

Time taken: seven days.

Oh yeah, baby... (and congratulations to all our Serbian Screwtape readers who buy gold, of which I am sure there are many thousands)