Gold to S/T Target, Now What?

By -

Now nothing… because a target is just a target.

We have been
here before; those of us who have been around the precious metals
markets throughout the current, ongoing secular bull. We have been
through the extended periods of questioning by 'the faithful' as to why
the ancient monetary relic does not keep up with more heavily gamed
assets, which are not coincidentally positively correlated to the
inflated economy.

Technically, gold has come to NFTRH's near term
target, recently revised from 1225 to 1240. But what is that but a
number? There is a higher target of 1300 off of the 1.5 year long
consolidation pattern beginning in early 2008. Then there is the longer
term target of 2200. These are all just technical mumbo jumbo my
friends because gold is only ever about value in a monetary world gone
insane. Gold is anti-casino, anti-speculation and anti-risk no matter
what the mainstream media would have you believe. I always get a laugh
out of MSM headlines along the lines of 'Gold Declines in a Flight From Risky Assets'.


In phases where the global printing press is on auto-pump and hope, if
not economic activity, gains traction gold can underperform the gamed
mainstream plays like copper, oil, high yield bonds and the stock market
in the short term. But few plays are at new all-time highs. Gold
remains so, even after spending the last year in downward consolidation
vs. the stock market, many commodities and the assets of positive
economic correlation.

'Armageddon 08' saw the real price of gold
explode to unsustainable highs and 'Hope 09' has simply been a
corrective measure. Gold investors who know the value proposition of
real money in a time of scarcity of same, just yawned while gold stock
investors and traders – those who know the play – look forward to the
next leg up in gold mining fundamentals, which grow by leaps and bounds
as the real price of gold increases; in other words as gold resumes its
outperformance mode vs. the things of hope, of positive correlation.
The gold-oil, gold-industrial metals and gold-stock market ratios all
factor in as gold miner costs decline in relation to their product.

have been using this chart to gauge the coming of the next phase of the
rise in gold's real price. It
is a simple chart noting a similar consolidation structure to the one
that held sway in 2006-2007 as the gold sector was cleaned out in
preparation for the coming events of the outwardly obvious credit
contraction and resulting market crash.


Gold as measured in the S&P 500 has much higher to go now that the
consolidation appears to be ending right at the uptrend line drawn on
this weekly chart weeks before it was finally hit. Blog readers may
recall the original post showing this chart from March 18th, Anything
Look Familiar?

As signs of frothy sentiment that the gold
sector is noted for get whooped up again, remember that if you trade the
sector, you generally sell the euphoria and buy its polar opposite
condition, despair. I am more of an investor due to current fundamental
views, so I will probably continue to hold many or most positions
indefinitely (likely with the protection of broad market short
positions, which the above chart says is a good strategy).

the none-too-subtle degradation of the global monetary system and gold
bullish or rising in all major currencies, there is also a chance for a
major spike here. In the markets in general, noise levels have
increased markedly off of the dull rise to a likely top in prices and
positive sentiment in April. We will keep a filter on this noise and
keep an eye on a real bull
market's progress. This would be the bull market in gold's real as well
as nominal prices.

Meanwhile, in the background the struggles
between the inflation and deflation stories play out short term. We are
on the way to an inflationary future, but gold alone is proving itself
of value during both conditions. The system is trying to deflate; this
is being fought tooth and nail as currency is burned in the battle.
Regardless of further upside or a sharp correction to support around
1000, gold is front and center and value will be retained until such
time as the system is overhauled.

Some people bemoan that I do
not make predictions. This is not the blog for them. A target has been
hit; there are several more targets higher and one lower. These are
the markets and you need to be ready for anything, including the
possibility that things are becoming unhinged here and now. Years ago I
started my simple web presence with a simple thought; be prepared. It
still applies.