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.