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March 23, 2010

Big Picture Gold

Since we've spent a lot of time over the last few weeks fretting the nuances of gold versus mining shares versus the dollar, I'd like to zoom out to the big picture on gold for a moment and see if there is anything wrong with the big picture.

gold weekly chart

I have no doubt that droves of mindless technical traders chased the breakout from that 18-month basing pattern, and the market gods just needed a little extra time to shake enough of them off to set up the next advance. Consider that since early December the dollar index has surged 6 points, yet gold has forfeited a mere $125. If that sort of resistance is not a testament to the gold bull, what is?

At some point, the rally in the buck is going to fail. We may have to see another leg up in the DX, pushing gold to a test of the $1025 breakout level, or perhaps the dollar will surprise the lot of us by turning lower sooner than later. Whatever the case, the consolidative nature of gold's action tells us that once the next advance takes hold, it will be a doozie.


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