Gold flat to down for years to come…I understand if you are thinking NO WAY or even a more colorful phrase!!! See below why the “Power of the Pattern” is suggesting this has a chance of happening.
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So far, what has happened 100% of the time the Franc has hit resistance line (1) since 1980? Gold has traded Flat to Down for years to come! Odd that the Franc is up against this 30-year line and Gold up against the top of its channel at the same time GLD became the largest ETF in the states? (see crowded Train/Eiffel tower pattern here)
Could it be different this time? It WILL BE DIFFERENT if Gold/Franc take out resistance! For sure plenty of Macro reasons around the world to make it differen’t this time around! The world will most likely look a TON different if resistance is taken out!
As always, resistance is resistance until broken. Gold and the Franc are both facing resistance and have created bearish rising wedges. If the support lines of the bearish rising wedges break at (3), the odds increase a good deal that Gold/Franc will be soft for a while.
A huge move today in swiss franc, can we expect the same in gold ?
USD/CHF and Gold has known high negative correlation. What you said is may be true.
On the other hand, correlation changes over time. I found that correlation between both instrument dropped from over -80 to -60 recently.
When everyone buying, who is selling?
Sorry. It sounds like the biggest load of nonsense I’ve heard in a long time.
The biggest problem in your posting is that you seemingly confused blue chips with penny stocks. The synch-movements between gold and sw-franc are collective reflections of investors to world economic warries in the past. Gold is much more widerly traded and has much bigger world liquidity. It is a blue chip. Compared with gold, SW-franc is a tiny penny stock. You watch blue chips for stock market directions. Not other way around. As long as gold’s trendline is intact, which is true so far, SW-franc will go with gold, no matter how hard SW-govt tries to hold it down.
I’m afraid that this pattern falls into the same category as the correlation between my waistline over the past 20 years and the expansion of the universe. The correlation is 100% perfect, I assure you, yet I wouldn’t suggest it is causal, and I do harbour hopes that I may yet curb my appetite without bringing on the Big Collapse.
The difference is that gold going up doesn’t hurt anybody in particular. Sure it may embarrass some, but its ascent is a symptom of the global financial crisis, not a cause of it. The high Swiss franc is different thing entirely. Switzerland has few natural resources, so it is almost entirely dependent for its wealth on the export of quality manufactured goods. The inflated currency is making things very difficult for these companies. There is an upper limit where a crash in exports causes the entire economy to go into recession, and guts government revenue. Eventually this would drag the currency back down.
There is no such corresponding mechanism to pull gold’s price back down, as has been pointed out by others, that will only happen if governments completely change their tune and turn their backs on Keynesian “solutions” to stagnant economic growth.
So when did the Swiss go off the gold backing for their Franc…
I think of gold as a way to chart the trend of global confidence in govts/politics/deficits and currencies. Note gold in the 90’s when US budget had a “surplus”. In my mind the price of gold and politics are very connected. Just because gold is apolitical doesn’t mean it is not susceptible to politics.
On a personal level one can be politically neutral in the work place and still have your career effected by office politics.
In my mind the question is, does deficit spending/currency devaluation continue at the 30 year rate “implied” in this chart or does it start to accelerate or decline?
TOL (thinking out loud)
Hey Axios,
perhaps what CK is presenting is simply a fork in the road – either policies are enacted that weaken the dollar and likely take out last support…which would help propel gold (and Swissie) through resistance. That could certainly be a significant QE program that is viewed as dilution of the currency.
The flip side is if for political or other reasons the Fed and congress are not able to come up w/ significantly more QE and stimulus the dollar could break out of it’s long downtrend and strengthen in short (mid?) term and leave gold and Swissie in the doldrums.
Both are conceivable and although I tend for towards the dollar devaluation side, the fact that everybody hates the dollar is reason enough for at least a short term rally at some point?
Axios,
I agree 1000% with your analysis on gold .Great job , you are correct about the Swiss Franc and the intervention that is taking place.But as you say as long as governments continue to print . china is set to open its own gold/silver exchange the soon-to-be-opened Pan Asia Gold Exchange .”
It is this Pan Asia Gold Exchange (PAGE) that is the short term game-changer. By providing the world with a physical settlement and pricing structure outside of the bounds of the current LBMA/Comex scheme, the PAGE may, once and for all, allow for true price discovery of physical metal. The PAGE will make the current pricing system obsolete as global investors seek true physical metal that is unencumbered by leasing, titling and derivatives.
This will be open to all retail investors–hopefully the comex will go the drain ,the sooner the better–
Morning Carlton…wow what an easy question you are asking…NOT! 😉
Rick Santelli (CNBC announcer) shared yesterday this quote..” If the markets don’t meet peoples pre-conceived notions, then the markets don’t seem to make sense to them!”
The majority of the time I beleive your “de facto bullish for stocks” is on track! One case that did throw a fly in this notion was 2008, when the “Great Escape” took place, per investors around the world went on a selling spree. During the 2008 financial crisis, the dollar broke above a key falling resistance line and the selling spree went into full swing…investors sold stocks, corp bonds, grains, cattle, gold and silver. The only investments they wanted more of, was the U.S. Dollar, cash and govt bonds.
The week is not over with, yet on a weekly closing only chart, the U.S. Dollar is attempting this morning to break a resistance line that has been in place for over a year and it has created a series of higher lows of late. So as important as this Fanc/Gold chart is, don’t take your eye of the Dollar right now!
Thanks for your viewership and this awesome very important question,
Chris
Chris,
Does the S&P show any related move to the gold/franc chart? I would suppose the chart would be de facto bullish for stocks?
CGH
The power of the pattern doesn’t take into account the massive amount of intervention that’s taking place in the Swissie that never has before. Ultimately, intervention is why gold continues to climb and will continue even if it takes breathers from time to time. You can’t print gold, or peg it to anther currency, and it isn’t susceptible to political pressure. Now throw in that central banks are becoming large buyers again for the first time in decades and it is becoming common to think about using gold to support currencies. All of that is incredibly bullish. The only thing that will stop the ascent is if gov’ts stop printing, balance budgets, and reduce outstanding levels of debt. That’s not likely to happen anytime soon IMO.