Gold and silver are rallying big time with big gaps on both charts. The non-farm payroll report laid a big goose egg this morning and global stock markets are in complete disarray. Real money, gold, is receiving the bid as capital flows to safety. This is the difference between 2008 and today, in 2008 there was confidence that the government could indeed do something to fix the problem. Today that confidence is shattered.
The dollar and bonds appeal to 2 different individuals: first the truly deluded who think the government can and will honor its debts, and secondly those who have no other choice and are trapped within the liquidity of the global reserve currency. For those who do not believe the government and their Fed can solve the problem that they created and are not trapped in the dollar for liquidity purposes, there is gold and its cousin silver. Rightfully so, our government, the Fed, and its impaired product (the dollar) is taking a back seat to money that has no counter-party risk. Do not think for a minute that the people who are buying gold hold any illusions as to how this must end. Do not look for a crater in the gold price to accompany a crater in the stock markets. Gold will be suppressed to some extent as the dollar creeps higher, but it will be in nominal terms not real. In real terms, what an ounce will buy, gold is going straight up.
Here is PHYS, my proxy for gold. Resistance is now the all time high at 16.86 with support coming from former resistance at 16.10. We have gapped up into the upper trend channel on the Andrew’s Pitchfork. The median line should now become support with the top line as resistance.
The head and shoulders outcome is looking slimmer and slimmer for gold and really isn’t a player whatsoever for silver. My SLV 45 calls are in the money and doing what I hoped they would do. A run to the swing high looks real good at this point with another higher high already printing on the chart. $1 turns from resistance to support and 42.78 is the new and closest resistance overhead.