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Discussion Topics -- August 2, 2012
Gold's Continued Consolidation
FED and ECB Disappoint
Fundamentals Pave Way for Breakout?


(August 2, 2012 discussion). Gold has continued to consolidate through the summer months, but the range of prices has narrowed. The result is a technical pattern resembling a triangle, also often referred to as a coil. Eventually, prices will break from this pattern. There have been numerous triangular patterns in the gold bull market thus far, and each time, the break has been in the direction of the dominant trend: Higher. Should we expect gold to do the same this time? The fundamental picture still largely favors gold. Both the Federal Reserve and ECB disappointed this week by not following through on expectations of announcing new rounds of economic stimulus (QE). Had either announced, gold would surely have broken higher. That said, the failure to make any significant move, especially by the ECB, has caused borrowing rates in both Spain and Italy to push higher. Europe continues to be presented with what looks increasingly to be an unsolvable problem. That said, the market is growing increasingly impatient with the 'all talk no walk' central bank policy, especially on the heels of Draghi's "Will do whatever it takes to save the Euro" comments from a week ago. The credibility of central bank rhetoric is rapidly deteriorating. What also merits consideration is that additional QE measures, while highly desired, may not ultimately have any positive impact on the economy. Such a failure could fatally fracture this already weakening central bank credibility. What kind of world would it be if no one trusted central banks to manage economic growth and contraction? Throw in the massive Federal debt in the United States against the backdrop of a slowing economy, and the outlook for gold remains quite favorable. Perhaps, this consolidation period is just like the one's before it, suggesting this is a buying opportunity running short on time. 27 Minutes, with Jonathan Kosares, Peter Grant and George Cooper.

Figure 1

golddaily graph

Figure 2

Gold weekly graph

Figure 3

Gold Euro Graph

Figure 4

Spanish Govt Bonds

Figure 5

italy yields

Figure 6
Madrid Stock Exchange

Spain stock market

Figure 7

Debt Limit Graph

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