Last weeks technical indicators saw gold continuing in a downturn in the short term but returning to the upward trend in the longer term.

Now the short term technicals are pointing positively for the yellow metal as the downtrend has reversed from its earlier drop down to the circa $655 level.

At the same time the European Central Bank has suspended gold sales until September but still clouding the issue is whether the sales by the Spanish Central Bank is continuing.

 

For every seller there is a buyer so if the Spanish activity is continuing it is unlikely to halt the upward trend.

Rumours abound that the Chinese are buying into the market but it should not be forgotten that China itself is a growing producer of gold and their government is taking steps to earmark that production for the benefit of their own reserves.

Overshadowing the whole of the Chinese economy is the Olympic Games and we believe that the authorities will make no significant moves to dampen down their economy and in particular unload their vast reserves of US dollars into more stable assets until that torch is extinguished.

That is not to say that they will discontinue using their dollars by buying into strategic foreign businesses and nothing is likely to stop their growing activities in Africa.

It will all continue to be low key, little media interest outside the financial and specialist press and controversy will be avoided.

But just wait until the Olympics are done and dusted in 2008 for another four years, that’s when we will all have to sit up and take notice as the Chinese dragon really starts to breath fire!

 

God help the dollar!

 

As an aside the UK are the hosts in 2012, pity them and their long suffering taxpayers as they struggle to provide the amenities at a time that many analysts suspect may be approaching the nadir of Britain’s economy.

An added difficulty is the awareness that the personnel in the present Labour government could not be trusted to run even a newspaper stand efficiently and profitably.

About the only thing they are capable of is self-preservation and even then there have been some notable failures.

Does that ring any bells amongst the Republicans and Democrats in the US!

But back to technicals and precious metals. The climb out by silver has been stronger than gold over a similar period and as is often the case the white metal has shown a little more volatility percentage wise.

The AMEX Gold Miners ETF has also broken out relatively strongly in these few days of June from the downtrend apparent since mid April and of course should continue to belatedly mirror the peaks and troughs of gold spot and futures.

Just watch out for the influence of fundamentals in the mining market.

For example labour difficulties such as the current wage demands by mine workers in South Africa whilst output continues to fall.

Floods, land slides political interference, general unrest in producer countries and even military or guerrilla attacks can play their part.

In our view there are two serious drivers amongst the many affecting the gold and silver price.

Demand continuing to outstrip supply and the falling value of the so-called fiat currencies with the US dollar well in the lead.

And that brings us to the gulf oil producers.

Currently we believe that together they hold near 50% more US dollars than the Chinese.

We have been told that they are becoming anxious to move away from their reliance on a declining dollar with the Euro cited as an alternative, but what about gold?

When you do your own analysis and possibly come to similar conclusions as us then the old adage comes into play.

Buy the dips and if you want to speculate in the short term then sell the peaks and get back in when the market corrects.

 

Good luck    

 

 

 

gold trend investing

If you're new here, you may want to subscribe to my RSS feed. Thanks for visiting!