Gold, Silver, and Dollar Analysis – 4 Oct

What can you say about the gold chart?  Not a whole lot other than gold maintains a solid bid, everyone wants it right now and there isn’t enough supply.  Keep in mind that what you are looking at is “paper gold” or the price discovery of a fictitious supply of gold that is leveraged anywhere from 40 to 60 times to that of actual existing physical supply.  So this chart is saying that fictitious gold is in short supply relative to demand.  What does that say about real supply versus demand?  What happens when demand for paper gold collapses and shifts to 100% physical?  It is coming, so consider that over morning coffee.

Resistance is now the all time around 1321, with support at the previous swing low of 1283. A well defined uptrend channel is in place and we are currently at the top of the channel. A period of consolidation could be expected which will allow price to work toward the bottom of the channel.  The bottom of the channel would also be a visual indicator of support and lies very close to the 18 day moving average, where one would expect support to come in on any short term correction.  The fibonacci 38.2% retracement line comes in all the way down at 1257.  This level represents a natural level that any ongoing bull move would likely seek during the medium term.  This type of retracement occurs when buying momentum has waned and has to be recharged.  When we have a reversal, look at this indicator closely.

Stochastic remains embedded (3 days or more above 80) and indicates increasing strength and momentum to the upside.  A cross back over 80 to the down side will target the nearest moving average, in this case the 18 day moving average at 1281.  Until then expect more of what we have seen, near daily all time highs.

Same story with silver different day. Nearly each day new highs are moving resistance levels. Support is all the way down to the previous swing low that currently sits at the Fibonacci 38.2 retracement level, around 20.53.  The 18 day moving average would provide support prior to that level around 20.91.  The 18 day moving average will be the initial target when stochastic loses embedded status (3 days or more above 80).

I think its instructive to look at the dollar and understand that this move in gold and silver is correlating strongly to the devaluation of the dollar.  This mechanism will drive both gold and silver into the stratosphere before this over when the the dollar dies. The chart shows the dollar is being taken to the woodshed and the Fed and the treasury are doing the spanking. It is their strategy to weaken the dollar to maintain the illusion of solvency. The dollar did not even pause at strong support around 80 and quite simply blew through it as if it wasn’t even there.  The next level of support comes at the low established back in January around 76.58.  The downtrend channel is well defined and we are approaching the bottom of the channel. Stochastic is embedded below 20 and telling us that increasing momentum to the down side is in the cards and all rallies are selling opportunities.

The long term weekly chart is the most interesting chart of all today. A triple top formation is on the chart and is formed by 3 equal and distinct peaks in price. A triple top is reversal pattern and indicates a projection to the downside.  That projection is a measured move equal to the distance between the base of the formation and the tops, then flipped to the down side as measured from the base.  In this case, the formation is 14.5 from the base to the 3 tops. The projection is 14.5 to the down side as measured from the base at 74, or 61.5.  This indicates that the all time low of 71 will give way.  Look out below!

Our Government and the Fed are in a jam. They can choose a global depression the likes the world has never witnessed and allow debt to be defaulted on.  Or, they can choose a default in the currency through inflation which is slower and more insidious.  It gives the illusion that a linear process is in play, but in reality it is linear and works only until it doesn’t work anymore. At that point, confidence is shattered and a highly un-linear event takes the value of the currency to zero.  That is the nature of the game these psychopaths are playing.  Get ready. They will call it a Black Swan, but it will be a lie.  The swan will be a garden variety white one.  Black Swans are only black when they are unanticipated by virtually everyone.  This swan is not only anticipated, it is a mathematical and logical certainty that it will be flying over our once great country in the near future.

Take heed and prepare!

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