"Experts have discovered a huge treasure underneath the Hindu temple of Padmanabha Swamy in the city of Thiruvanthapuram in India. The temple serves as a shrine to the Hindu Lord Vishnu. The shrine has been around since the 10th century, but the six offering vaults have been sealed since the 1930s. Five vaults have been opened. About $20 billion in treasure was found. The sixth vault has yet to be opened because it is sealed with special locks, but it is thought to contain even more riches. Hari Kumar, a temple official, said, ‘Though we knew that offerings made to the temple by devotees for the last 500 years were lying in these secret cellars, the scale of the treasure has definitely surprised us.'"
The discovery of this ancient treasure has sparked a major interest in the mainstream media as indeed it a discovery of this magnitude would be expected to. Reading through some of the reader comments this story provoked, I found the following comment to be amusing in its blithe dismissal of the treasure's monetary value: "When you consider that a hedge fund manager can bring home a billion each year as a bonus, $22 billion over 500 years isn't that big a deal."
In a time when we're used to hearing terms like billions and trillions being thrown around every day, I supposed a measly billion doesn't seem like much. And perhaps $20 billion stashed away for so many hundreds of years doesn't resonate as much with today's jaded news audience, accustomed as it is to hearing money spoken of in the trillions on a daily basis. But unlike the tens or even hundreds of billions of dollars which today's hedge fund managers oversee, there is a vast difference between it and the billions of dollars worth of gold from centuries gone by. The chief difference lies in the fact that the gold from 500 years ago is still worth a fortune today while today's billions could be reduced to mere pennies on the dollar in a matter of days or even minutes in today's fast-moving financial world.
The billions of today are represented primarily in electronic entries and are ephemeral creations of debt in many cases. These "billions" will almost certainly have little or no value 100 years from, while the wealth accumulated in the form of hard assets possessing intrinsic worth, notably gold, will always have value in the long term. Indeed, the lesson learned from the $20 billion temple treasure is that gold always maintains inherent value despite the ravages of time and chance. Today's electronic billions, by contrast, are far more vulnerable to these ravages and unlikely to maintain long-term value. For long-term investors, the best choice is obvious and has once again been validated.
Returning to the immediate-term outlook, gold has clearly benefited from the latest weakness in the U.S. dollar. The impact of dollar weakness on the gold price is obvious: a weaker dollar generally translates into a strengthening gold price. The question whether we can reasonably expect gold to continue moving higher after it has already dramatically overstretched from its nearest short-term trend lines in recent weeks? When upside momentum has been established and becomes self-perpetuating, as it has in the gold market, an "overbought" or overstretched gold price can always push higher before the proverbial rubber band snaps back and price declines. If this were a simple case of looking at the market technicals, one could argue that gold's latest move to new highs has caused the price to over exceed its median trend line, which in turn would suggest a corrective move lower is in the offing.
In the present case, however, gold has another powerful factor in its favor right now, namely fear of the unknown. The ongoing debate over whether or not the U.S. debt ceiling should be raised is currently fueling the widespread move into gold as investors on both the retail and institutional sides of the fence buy gold as a safe haven against the fear of what may happen to the USA's credit rating in the fallout over the nation's debt debate. Even if Congress chooses not to take the deflationary rout in addressing the nation's over-indebtedness, gold should still benefit from the classic fear and uncertainty factors that will continue to swirl around the nation's—and the developed world's—debt problems.
From a purely technical standpoint, the gold price remains decisively above two of its most important trend lines: the 30-day and 90-day moving averages. If gold remains above its 30-day MA on a closing basis on any near term pullback, its forward momentum will remain intact and it should be able to continue its pattern of higher highs and higher lows. Whenever gold decisively violates its 30-day MA on a closing basis, it tends to lose momentum.
The most important intermediate-term consideration for gold is the 90-day MA (green line in above chart). This particular moving average has kept gold's interim uptrend intact during the last couple of pullbacks as you can see here.
Gold and Gold Stock Trading Simplified
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Clif Droke is the editor of Gold & Silver Stock Report, published each Tuesday and Thursday. He is also the author of numerous books, including most recently, "Gold & Gold Stock Trading Simplified." For more information visit www.clifdroke.com