Thanks for the nice comments. My research over the years has told me that the real cause effect relationship with Gold has been inflation. There are certainly economic links to the dollar and inflation, but to keep it simple I focus on inflation as the intermarket driver of gold.
Just looking at the CPI and how it has dropped from the mid to late 80’s down into 2000, that in my view is what drove Gold downward. The main point I was making with those projection numbers is that I do not use them. They are widely used in the financial community by “experts.” I just threw them out there as possible destinations. I think I said that I do not use them, I did not reread my post.
I wish I could post charts, every time I try to it just shows as a bunch of wierd looking code. I would love for someone to help me figure that out.
Many big picture tops in commodity prices have been formed by that big run up like is shown in your chart. Then followed by the sharp drop, then another run up like we are in that fails. That is why I am focused on the 574 level. I think if that level breaks the whole run is over for good, so price could drop a long ways if that occurred. It would probably go further than those projections if this happened.
For now the long term trend is still up. The commercials are sneaking back to the long side as of yesterday’s report so this may set up another nice buy spot soon.
The RE/China/Budget deficit angle to this may in fact be correct, it is just not how I as a trader analyze trades. I want to base my decisions on things that are objective, not subjective. I have learned over the years that is the approach that works best for me. I have friends that take the “story” approach that do well, and some that do not. Analyzing the story is a tough undertaking due to the number of different variables that can be considered. It just becomes information overload for me.
In many years past it just seemed that I would often either incorrectly analyze one variable, or leave one out that turned out to be the one that told the tale. There are alot of assumptions out there about big dollar declines, China’s demand equation, and the deficit. However, alot of those are what we all assume is going to happen. There is a saying in the trading world that goes something like this. “What we all assume or are sure will happen, never will.”
In summary, my view is the following on GOLD. The trend for Gold is still up and remains so as long as 574 holds. It appears the “insiders” are starting to buy this dip. If the commercials get over 90% long and a shorter term entry pattern sets up, I will be a buyer of Gold on a breakout of it. If 574 breaks, I will only be looking to short rallies afterward as the game will be over on the long side.
