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Discussion Topics -- April 11, 2011
The Perfect Storm in Gold

(April 11th discussion) -- Numerous geopolitical and financial factors have converged over the past several weeks, pushing gold to all time highs and silver to 31 year highs. The debate over fiscal responsibility has begun to heat up in Washington, coming on the heels of a near government shutdown over the past weekend. Given the political headwinds to implementing the difficult policies required to make any substantive impact on budget deficits, it remains unknown if any meaningful action will be taken, or if a continuation of existing monetary policies will prove more palatable. With a government stuck squarely between "a rock and a hard place", the dollar index has fallen precipitously to within 4% of its all time low. Simultaneously, instability in the Middle East and North Africa continues to place push the price of oil higher, placing upward pressure on all commodities. Peace in Libya is no closer than at the outset of its conflict, leaving some to worry unrest could continue to spread to other areas of the Middle East, namely Saudi Arabia. Complicating matters further is a reawakening of sovereign debt issues within the European Union. Portugal looks poised to accept a bailout, while the economies of Greece and Ireland have failed to improve, and the giants of Spain and France look increasingly exposed to the same fate. Meanwhile, inflation in the Euro zone has begun to escalate, prompting an increase in interest rates. Such increases are feared to scuttle the growth needed to carry the PIIGS nations out of their malaise. In all, these and many other factors are contributing to form a perfect storm in the metals markets.

Figure 1
gold price 2009-2011

Figure 2
gold and 200 day moving average

Figure 3
gold and 200 day moving average

Figure 4
gold and 200 day moving average

Figure 5
gold and 200 day moving average

Figure 6
gold and 200 day moving average

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