GoldMoney Alert - 2 November 2008

Gold Is Still in an Uptrend

Gold is in an uptrend no matter which of the major currencies you look at. Here are charts of several major currencies as of Friday's close, which has added significance because it was also the end of a month. Day-traders and ‘scalpers' normally don't carry positions over weekends, so that noise is gone. And portfolio managers will generally position themselves carefully at month-end because that is when their performance is evaluated. So at Friday's close you are basically looking at positions being carried by so-called "strong hands".

I'll begin with the strongest chart first, which means it presents gold against the weakest currency. That dubious distinction goes to the South African rand.

The gold price in rand is only 10.4% below its all-time high. Not far behind is the British pound, which is only 12.3% below its all-time high.

Third and fourth place for the weakest currencies – and hence, the strongest gold price – is nearly a dead-heat. The price of gold in Canadian dollars and Indian rupees are 13.9% and 14.0% respectively below their all-time high.

Fifth place is held by the Australian dollar price of gold, which is 18.3% below its record high, while the US dollar holds sixth place at 28.2% below its all-time high.

There are three more currencies in this competition, but they need further explanation. This horse race is not exactly even.

The six currencies above have all made new record highs within the past six months. The Japanese yen, Swiss franc and euro have not yet climbed above their 1980 high (I've used the Deutschemark for comparison in the period before the euro was created). The euro, Swiss franc and Japanese yen are 24.2%, 38.3% and 65.1% respectively below their 1980 high. But they are only 12.9%, 20.0% and 31.6% below the high recorded within the last six months. Here are their charts.

I have three more important charts as of October 31st that I would like to present. The first is silver in terms of US dollars.

Silver remains within the same long-term basing pattern – marked by the green lines – to which I have been drawing attention for years. Its recent price drop is probably its last setback before resuming its uptrend, which will eventually lead to silver's upside breakout from this basing pattern.

The next chart presents the CRB Continuing Index in terms of US dollars.

Here too the uptrend remains intact, notwithstanding the recent big drop in commodity prices. This index is down 38.0% from its record high reached at the end of June (the above is a monthly chart). However, it's still in an uptrend. Notwithstanding the correction it has endured in recent months, it is worth noting that the CRB Index is still more than two times higher than its low price in February 1999, when this bull market in commodities began.

There is one more piece to this puzzle. It's the US Dollar Index, and its chart is presented below.

The bear market rally in the Dollar Index over the past four months is as strong as the two back-to-back bear market rallies in the early 1990s. There is an important message in that observation. There is a good probability that this current bear market rally in the Dollar Index is drawing to a close.

Thus, the flight out of the US dollar into commodities and gold will probably resume soon. After all, nothing fundamental has changed for the dollar. Its outlook worsens by the day as the federal government creates ever-more schemes and gimmicks to bail out insolvent banks and jumpstart a moribund economy. As a result, investors and fund managers will soon understand that they are at risk by sitting in US dollar cash and owning US government debt.

In summary, gold is still the place to be, regardless which currency you compare it to. Gold is climbing against all of the national currencies presented in the above charts.

Published by GoldMoney
Copyright © 2008. All rights reserved.
Edited by James Turk

This material is prepared for general circulation and may not have regard to the particular circumstances or needs of any specific person who reads it. The information contained in this report has been compiled from sources believed to be reliable, but no representations or warranty, express or implied, is made by GoldMoney, its affiliates, representatives or any other person as to its accuracy, completeness or correctness. All opinions and estimates contained in this report reflect the writer's judgement as of the date of this report, are subject to change without notice and are provided in good faith but without legal responsibility. To the full extent permitted by law neither GoldMoney nor any of its affiliates, representatives, nor any other person, accepts any liability whatsoever for any direct, indirect or consequential loss arising from any use of this report or the information contained herein. This report may not be reproduced, distributed or published without the prior consent of GoldMoney.