{"id":37264,"date":"2013-04-02T21:37:23","date_gmt":"2013-04-03T01:37:23","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/?p=37264"},"modified":"2013-04-02T21:37:23","modified_gmt":"2013-04-03T01:37:23","slug":"coming-soon-the-next-breakout-for-gold","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2013\/04\/02\/coming-soon-the-next-breakout-for-gold\/","title":{"rendered":"Coming Soon: The Next Breakout For Gold"},"content":{"rendered":"

By MoneyMorning.com.au<\/u><\/a> <\/p>\n

For years, the Federal Reserve<\/strong> has herded investors away from cash and bonds<\/a>. It wants to keep investors bullish on stocks, hoping higher stock prices will create a wealth effect. <\/p>\n

Along with stories of new highs in the Dow, newspapers are running stories on the Federal Reserve\u2019s <\/a>role in pushing up prices. The Fed\u2019s support for the stock market,<\/a> freshly baked in early 2010, is now a stale theme. <\/p>\n

By the time a theme is constantly in the front page of the newspaper, it\u2019s already played out. Newspapers reflect investors\u2019 existing investment stance; front-page stories don\u2019t feature investments that are ignored or cheap. <\/p>\n

If you look beyond the sound bites and groupthink, you\u2019ll find few investors that really believe in this market. Many fully invested stockholders plan to sell on the first sign the run is over. <\/p>\n

Meanwhile, the buying pressure needed to push the market even higher from here must come from retail investors who\u2019ve sworn off stocks after two crashes since the year 2000. It\u2019s possible, but not likely. And even if possible, \u2018greater fools\u2019 rushing into the market at the top would hardly lead to a wealth effect. <\/p>\n

The US Fed Creating a Disaster <\/h2>\n<\/p>\n

Investors\u2019 psychology of noncommitment \u2014 \u2018I don\u2019t really believe in the sustainability of this bull market, but I\u2019ll hold stocks because there is no alternative\u2019 \u2014 sets the market up for a steady drift higher, punctuated by sharp crashes. If the Federal Reserve wants to sustain the artificial stimulus gains in the market, it must respond to each crash with promises of more easy money.<\/p>\n

History shows the Fed excels at creating bubbles, yet is completely inept at controlling conditions when bubbles pop. At the end of this mission to create a wealth effect, stocks may be a little higher, but the economy won\u2019t be healthy, and faith in the dollar\u2019s integrity will be shattered. <\/p>\n

Investors have yet to flock to gold and silver <\/strong>as safe havens from currency chaos. But with central banks<\/strong> stuck in a permanent cycle of quantitative easing, investors will eventually think through the implications and position themselves accordingly. <\/p>\n

George Topping, a gold mining analyst from Stifel Nicolaus, published a chart showing the US adjusted monetary base and the gold price<\/a>. In the first two shaded areas of the chart, the Federal Reserve\u2019s QE programs inflated the monetary base,<\/strong> and gold rose in lock step:<\/p>\n

\"\"<\/div>\n<\/p>\n

The third shaded area is the latest round of QE. The monetary base is rising as fast as ever, yet gold prices have fallen<\/strong>. This phenomenon is unlikely to last. The monetary base will keep growing, which will continue increasing the value of gold versus paper. <\/p>\n

Gold and Silver Will Go Higher <\/h2>\n<\/p>\n

It\u2019s only a matter of time before the market recognizes that there will be no exit from quantitative easing<\/strong> and there will be no shrinkage of the monetary base. When that happens, gold and silver <\/a>will break out of their long consolidations. <\/p>\n

In its note, Stifel mentions that savers in Argentina, where confidence in the currency is collapsing, are rushing to buy up physical supplies of gold<\/a>: <\/p>\n

\u2018Argentine citizens are reported to have increased gold purchases in order to protect their savings (versus current inflation of 26%). The only gold trader in Argentina, Banco de la Ciudad de Buenos Aires, is apparently in talks to buy gold directly from miners as scrap supplies diminish.\u2019 <\/em><\/p>\n

Buying directly from miners? If that is the case, it shows how quickly physical gold can disappear from the open market once a bankrupt government uses its central bank<\/a> to finance its budget. In the USA, based on the status quo policies and political math, we are heading in that direction. <\/p>\n

Dan Amoss
\nContributing Editor, Money Morning<\/em><\/strong><\/p>\n

Join Money Morning on Google+<\/u><\/a><\/strong><\/p>\n

From the Archives…<\/strong><\/em><\/p>\n

Why Dividend Stocks May Not Stay This Cheap for Long<\/a>
\n29-03-2013 \u2013 Kris Sayce <\/p>\n

Respect the Market Trend, but Don\u2019t Expect it to Last<\/a>
\n28-03-2013 \u2013 Murray Dawes <\/p>\n

Silver \u2018$100 Within Two Years\u2019<\/a>
\n27-03-2013 \u2013 Dr. Alex Cowie <\/p>\n

11 Billion Reasons to Expect a 200% Move in Gold Stocks Within Months<\/a>
\n26-03-2013 \u2013 Dr. Alex Cowie <\/p>\n

You Want Proof the Stock Market\u2019s Heading Up? Try This…<\/a>
\n25-03-2013 \u2013 Kris Sayce <\/p>\n

\n<\/img><\/a> <\/img><\/a> <\/img><\/a>\n<\/div>\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

By MoneyMorning.com.au For years, the Federal Reserve has herded investors away from cash and bonds. It wants to keep investors bullish on stocks, hoping higher stock prices will create a wealth effect. Along with stories of new highs in the Dow, newspapers are running stories on the Federal Reserve\u2019s role in pushing up prices. The … <\/p>\n

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