Wednesday, August 10, 2011

John Foster: My Brief Thoughts on Gold, World Economics and Currency.

Although I don't believe we are in a 2008 crisis again, we have been here before with gold in the summer of 2007. (This summer we hit a big downward trend in June then Bernanke came on TV and said QE3 and gold has been on a parabolic move since). To augment yesterday's email I sent (
) when charts go parabolic the market see's a 25-40% upward movement from the point of the upward trend. (Using the 40% figure from the point of the upward trend, gold should touch close to $2,100)  In 2007 it took 14 months to complete its parabolic cycle; we are almost two months into this cycle. It took seven months to hit its record price in the cycle before a major correction.

Another sign of a bubble in place, but no where near it's medium term top (12-18 months) [I do believe we will see a correction in the next week or two]), I am a bit bullish on gold for the medium term now due to the statement from the fed of keeping interest rates at exceptionally low rates for the next two years. In addition, there is a lot of currency weakness not just in the U.S but also in other world economies; Europe and China are not going to solve their problems overnight.

Many nations will get involved in the game of devaluing their currency like America is. This is going to cause more and more investors around the globe to seek the 'safe haven' of gold. (Look at the Swiss Franc the last 6 months up + 34% as of 8/10/11). If (Most likely WHEN now that the Fed has more of a pessimistic view of the economy) we get a QE3 (or something of the sort) expect another shot in the arm to gold. The Fed can’t keep interest rates this low for another two years without another round of stimulus.

No comments:

Post a Comment