Thursday, April 5, 2012

The Current Gold Price And Its Broader Implications

Gold has been in a correction (or consolidation) after a very steep rally.

It appears as if Gold is at a critical juncture at present.  The chart below depicts Gold on a daily basis, LOG scale, since 2008, as well as the HUI (Gold Bugs) stock index.   Gold, at $1622.80/oz, is currently below both the 200dma (depicted in red) as well as the 50dma (depicted in blue).  A rising trendline (broken to the downside) since early 2009 is shown in cyan:

(click on chart to enlarge image)(chart courtesy of; chart creation and annotation by the author)


I have written of the broader implications of Gold’s price movements.  In one post, that of August 25, 2011 ("Gold And Deflationary Pressures") I wrote the following, which I continue to believe is applicable:
I am very closely monitoring Gold as I believe a steep, abnormal correction could serve to (further) indicate deflationary pressures – which of course would have outsized impacts on financial markets, the economy, and economic policy (particularly QE3 or some other large intervention.)

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1398.97 as this post is written

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