Gold Needs More Time to Dither

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". . .gold is not quite ready yet to blow past $1,000 once and for all."

We've never been gung-ho about head-and-shoulder patterns, mainly because they seem to pop up everywhere you look for them. Textbook patterns aside, evidence has been accumulating in recent weeks that gold is not quite ready yet to blow past $1,000 once and for all. Our target for the August Comex contract, currently trading near $960, has been $1,066; however, on the intraday charts, every time buyers take a running start at the Promised Land, the rally loses steam before it can surpass the two prior peaks that Hidden Pivot analysis requires to signal an impulsive move. And even when the requirement is met on the very lesser charts—say, the 1- or 3-minute bars—it is invariably matched by a move of equal magnitude in the opposite direction. We refer to this dynamic as "dueling impulse legs," and it suggests that traders are locked in a dither.

More dithering would be all to the good as far as the dollar is concerned, since a sustained rally would increase the deflationary pressure on all who owe dollars. At some point, if these debtors can no longer continue to roll their loans, they will be forced to settle up in cash, potentially create a dollar short-squeeze. But even if panic conditions do not develop, a merely modest run-up in the dollar would be bad news for the economy. It is surely the last thing the government wants, or could have anticipated, in its panicked efforts to breathe a whiff of inflation into America's imploding financial edifice.

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