The Fibonacci Gold Thermometer
by Morris Hubbartt
321 Gold
The US Bond
market is a debt market. Evaluating the US bond from a fundamental
view point shows there are several things that make the US bond
a long term investment to avoid.
The dollar
is being diluted by the Federal ReserveÂ’s quantitative easing
programs. Upon maturity, bond investors are set to be paid with
a currency worth much less than when the bond was issued.
Most governments
seem to be hopelessly addicted to spending money. The debt in the
United States is now nearing $16 trillion, which is an amount too
large to be honestly repaid.
The deficit
is now growing by roughly $1 trillion every year. It overwhelms
GDP growth. For every dollar collected in tax revenue, an additional
dollar is being borrowed. Higher taxes canÂ’t fix the economy.
They will slow it down and create even bigger deficits.
From a technical
stand point, the bond is overbought, yet it could become even more
overbought.
The gold
bond synergy chart that I am highlighting this week shows how the
bondÂ’s price action can signal the end of a gold market correction.
Note the bullish
rectangle technical pattern on gold in 2008, and how similar that
is to todayÂ’s market. When bond prices are substantially extended,
as they seem to be now, gold can begin a big move higher.
Why become
a creditor and buy debt you probably canÂ’t collect on, when
you can buy gold instead?
Gold appears
to be completing its correction. A triangle formation is very bullish,
and the MACD indicator at the bottom of this chart will likely be
the trigger that shoots the gold bullet up and out of this triangle.
Because this
price pattern is most prominent on the weekly chart, it carries
more “technical weight” than if it only appeared on a
daily one.
The 61.8%
Fibonacci retracement line of the move from about $1309 to $1923
has been the main support for gold at the lows of this correction.
Substantial commercial buying has occurred each time the price has
declined towards $1544.
The posture
of the “Slow Stokes” and the CCI indicator are also bullish.
Senior gold
stocks are arguably now leading the precious metals sector. GDX
is doing battle at the important Fibonacci 38% bull market retracement
level. The number I have been watching closely is $47.25.
As of today,
we have now had three closes above that level. The “three
day close” is an event which confirms technical strength.
My work targets $53.50-$55.
A move above
$48.50, if it comes on strong volume, would be further confirmation
of a new bull phase.
June
25, 2012
Copyright
© 2012 321 Gold