Gold: Setting Up for Its Next Move Upside?


"Isn't gold the ultimate ponzi scheme?"

Gold remained firm despite the current strength in the greenback. The Dollar index reached 80.88. However, with exploding national debt, we are going to see further currency devaluations. This, combined with strong investor demand, is setting gold up for its next move to the upside.

While some Wall Street's analysts claim China is in a bubble, I don't buy this at all. In fact, I am sure China's GDP growth will continue at 9% if not more. As China continues to transform itself into a major economic power, demand for gold, and silver for that matter, will continue to increase. . .As this new consumer class emerges, demand for gold jewelry will only increase.

On Thursday March 4, I happened to watch an interview on CNBC with Marc Faber. When Simon Hobbs asked why people should invest in gold, he really denigrated gold. He referred to the precious metal as "an inanimate object that sits in a dark damp cellar somewhere that may or may not be in short supply and may or may not glitter in the current light but really has no productive power. Isn't gold the ultimate ponzi scheme?" he asked. What a ridiculous assumption! Gold is most certainly not a ponzi scheme. It is a monetary metal that's been around for centuries. And, while it may appear to be inanimate, it has an intrinsic value that is recognized in almost every country in the world. It is a store of value and a proven way to preserve wealth. While its value depends on numerous different factors, the current environment of expansionary monetary policies, exploding national debt and global currency devaluations, are going to be very favorable for the price of gold. And, as Marc Faber stated, everyone should own this metal.

From around the beginning of February, gold has been edging upwards. While the long-term trend remains very much intact as seen by the 180-day moving average, the short-term trend looks positive. However, gold needs to break out of this consolidation pattern that began in December 2009. A key short-term sign will be a break above USD1150.

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