Monday, August 31, 2009

Is Gold Getting Ready To Launch?

As you can see from the chart posted, the price of gold has been "coiling" into an ever-tighter pennant formation.   This technical formation can often lead to a substantial upside breakouts. 

(click on chart to enlarge)

We are now entering into what is historically the best seasonal period of the year for the price of gold and mining stocks.  It looks like the European Central Banks are largely done dumping their citizens' gold, which will only add to the very tight market conditions.  India, historically the largest gold buying country in the world (China recently surpassed India)  is entering into its biggest gold buying time of the year.  It is in the autumn in which Indian farmers tend to invest their profits into gold.  An even bigger component is the gold buying which occurs for Indian weddings, which tend to happen during the festivals in October and November.  It is estimated that 40% of Indian gold demand occurs during the autumn.

Finally, in what can be seen as incredibly bullish for the price of gold,  the Central Central Fund of Canada (CEF) just filed a prospectus filing for periodic share offerings up to $1 billion.  CEF issues stock and then uses the proceeds to buy gold and silver bars, which CEF holds in trust.  Unlike GLD, which refuses to show the world whether or not it really holds the gold it supposedly buys with shareholder money, CEF will accomodate any visitor who would like to view the CEF vault with their own eyes.  CEF is seeing enormous demand for their shares from big funds, but typically only issues shares when the stock trades around 15% above the value of the underlying gold and silver in the trust.  This filing is HUGELY bullish. 

Keep an eye on the $960 and $980 price levels.  If you wait until gold breaks over $1000, you might find yourself waiting for a pullback that never comes.


  1. This is old information, but worth a look anyways:

  2. Thanks for linking that gyc. Hopefully people who read the blog post and check the comments will pull up that link and learn more about what's really going on.

    I believe the U.S. gold reserves are substantially either sold or leased out.

  3. Scary stuff, I would love more clarification on that export data. Strange metals day, silver strong all day but Gold had to climb back from a rough early session. I am watching Gold $980 and Silver $15 as breakout zones. Great blog.

  4. gyc: thanks for the feedback.

    if you do search on "Ron Kirby gold" you will find articles he's written on the subject matter. Kirby was actually the first person to point out this data. I'm pretty sure some of his work on this has been posted at