Upon analyzing over 30 years of data involving the gold price, we conclude that the seasonal lows usually occur in March and June. Quite often however, after the June low a secondary low is experienced in August. This secondary low is usually slightly higher than the primary low. People who have resisted the temptation to buy the June low will usually take advantage of this last opportunity before the start of the Christmas rally that seems to happen almost every year.
The past few days have seen the domineering short sellers do their utmost to drive the price into the basement, hoping that they might be able to reduce their ‘net short’ position which had grown quite high. At some point the hedge funds and thinly margined investors run out of gold to sell to them and then the selling dries up. Next some technical buy signals commence to flash and buyers begin to outnumber sellers again, and this starts the next rising sequence.
Gold is amazingly cheap just now. At the current $880.00 it trades at just $30.00 (or 3.5%) above its 1980 high. During the 28 years since 1980, practically everything has risen sharply in price. From milk, bread, eggs, meat, fish, cars and houses everything else is going up in price by leaps and bounds. Cars and houses may be slipping in price at the moment, but they are still priced in multiples of their 1980 prices.
This comparison makes one wonder if the price of gold might be artificially depressed.
Actually that is precisely what GATA (www.gata.org). and Frank Veneroso (www.venerosoassociates.net) and John Embry (www.sprott.com) have been asserting for years.
If indeed someone or a number of people are involved in deliberately suppressing the gold price, then sooner or later the price will rise like a beach ball that has been pushed under water. The central banks of the world tried the suppressing game in the 1960’s and they failed. The reason for such suppression is the knowledge that gold is an obvious barometer for price inflation. It is much easier to inflate the money supply with a constant gold price than it is with a rising gold price.
The amount of gold in existence is finite. It cannot be increased any faster than by 1.6% per annum (the rate at which mines are producing gold). Whereas the amount of money in circulation is currently expanding at double digit levels, on a worldwide basis. The US M3 money supply back in 1980 was 1.8 trillion dollars. Today, according to economist John Williams (www.shadowstats.org), the US M3 money supply has ballooned to almost 15 trillion dollars. Some of that extra money has the potential to move into gold.
The stage is set for a remarkable rise in the price of gold.
Peter Degraaf is an online stock trader, with over 50 years of investing experience. He issues a weekly alert to his subscribers. For a 60 day free trial, send him an email at email@example.com, or visit his website www.pdegraaf.com Every ‘hit’ registered at the website brings a nickel for the monthly charity. One of the features at the website is a collection of worthwhile quotes that are meant to educate and entertain.