first majestic silver

Truth vs Ego

December 4, 2002

A couple of people have taken me to task for my most recent article which drew attention to some technical non-confirmations and, therefore, to the possibility that Gold might not yet break up - as the charts have been apparently pointing to.

My ego can quite comfortably contemplate the possibility of my being wrong, so let's examine the arguments that have been put forward by the critics:

  • The Dow and Gold do not have as tight an inverse relationship as the dollar, and it is a mistake to argue that if the Dow rises, the Gold price "must" fall.
  • Inflation is being foreshadowed by both the Commodities chart which looks like it too wants to break up, and by the Bond markets - which are showing signs of rising yields in anticipation of inflation.
  • If inflation wins out, it defies logic that the gold price could fall.

It seems from the above charts that the markets may indeed be anticipating inflation.

Ahh! But if we are going to look at some charts and not others we could be accused of practising "selective perception" (seeing what we want to see)

For example, here is today's chart of the US Dollar:

Note how it, too, looked like it wanted to break up today; and my critics can't have it both ways.

If there is not as strong an inverse correlation between the Dow and the Gold Price as there is between the US Dollar and the Gold price then a rising dollar will equally put a downward pressure on gold which, incidentally, was not as volatile today as one would have expected.

So let me emphasise the point that I was attempting to make in the previous article:

The charts are NOT CLEAR regarding the future direction of Gold because, although the long-term chart of gold is looking bullish, there are several non-confirmations. If one takes these non-confirmations into account it would be wiser to wait for the market to give a CLEAR signal than to try to second guess it and take a position at this juncture. Making any commitment at this point would be too risky a proposition because the odds of being right/wrong are 50/50.

In short, I was not forecasting a fall in the Gold price, I was admitting that at this juncture, I don't have the courage to take a firm stand.

Gold is still being mined and refined at the rate of almost 2,600 tonnes per year.
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