We are seeing metals up again after a run up followed by a down day. I think we are starting to set up a new base at $1,700 up from $1,650. I would love to see the metals do a $50 stairstep base development process over the next 2-3 months. Basically, I would like to see a pattern of higher lows as follows:
$1600, $1650, $1700, $1750, $1800, $1850, $1900, $1950 versus what we got with the last run up to $1900 which was start at $1500 run to $1650 pause for 2-3 days then ran up to $1750 with a short pullback to $1700 before running to $1920's. If we could maintain a $100 trading range with $50 increments in the steps, this would build a tremendous stair up with lots of support points on any weakness. With the past run up we had two support points $1700 and $1650. Well we blew past the $1700 but luckily the $1650 caught us. If it had not caught the fall then we would have seen $1500 as the bottom and don't think we would have seen a return to $1750 as quickly as we did.
During this past month of recovering prices we have had a nice base setup between $1650 and $1700. So that any future fall should hopefully stop at $1650 again. With the current price action I would anticipate to see a short break from upward pressure and prices stagnate in the $1700-1750 range.
However, we have the EU/Greece crisis. We have the US Super Budget Committee not coming to a consensus and in fact seeing them moving further and further apart. We have the Japanses bank yen-selling trying to stablize their currency in the wake of the Eurozone debacle. In all I think we have lots of things that should be pushing Gold higher but we are not seeing that materialize.
One of the reasons why the average person is not buying Gold and Silver and other non-fiat monetary items is because of their lack of understanding. Here is some proof that average people do not see Gold as the Ultimate form of Monetary Value. First we have our own U.S. Fed Chairmans state before Congress back in July 2011 "Gold is not money". Second, we have Bridget Brown, a Canadian Television news reporter, state "Some investors are not confident with what gold is backed by, or if it's backed by anything at all, compared to something like the U.S. Dollar. Investors are comfortable that the U.S. dollar is backed by the American government, so no matter what is happening to the American economy, something like the U.S. dollar is backed by the Federal Reserve."
O.K. so I agree, Gold is not money, because Gold actually has it's value set by "open"-"free"-trading markets and not arbitrarily. If people are comfortable by the "backing of" tag for U.S. Dollars then we are in for a world of hurt, "Oh, wait! We are already half way there". I am sorry, the "backing of" any investment to me says, "We know our investment is a terrible idea and we will back 100% until we enter into bankruptcy and have any promises we made negated". If, what I will term the slightly above, average person (Bernake and news reporter, yeah I know it is a strech) can not fanthom the real place of Gold as a holder of value then how could the average and not so average person even begin to understand the true place of precious metals in uncertain times?
Gold is not trading up because everyone is buying Gold but because only the "in-the'know" people are concerned about where everything in our world (not just the U.S. not just the Eurozone) is headed. Will the average person ever be buying Gold? I do not think so, because by the time they start to understand and start to want to participate in the precious metals markets, things will be much worse and they will not have the assets to convert to other forms of value.
While I do not foresee a total breakdown of society, it would not be a bad idea to stock up on non-perishable foods and supplies for possible short-term disruptions in the future. Nothing drastic, but I do think we will have supply-side disruptions which will cause temporary demand-side problems.
Anyway, that is my take on things for today 11/02/2011. Take care and be safe.
Mother