More New Highs

What do the Australian dollar, South African rand, Indian rupee and the Chinese yuan have in common? Last week gold closed at an all-time record high against each of these currencies.

To emphasize this important point, these were record highs, not just multi-decade highs. Gold has never been higher against each of these four currencies.

As gold sails into uncharted water against these four currencies, it is reasonable to expect more record highs in other currencies in the weeks and months ahead. For example, gold is just £11 shy of an all-time record high against the British pound, so it will probably be the next hurdle to fall.

In short, gold's bull market around the world is alive and well, and getting more interesting by the week.

If gold sails into an all-time record high against the British pound, can a new all-time record high in the dollar be far behind? I don't think so. The $850 level reached by gold in January 1980 still seems far away. However, gold's action over the past several months - and particularly the ferocity it has shown since breaking above $500 this past December - suggests that $850 remains a reasonable target for this year.

The above chart presents gold in terms of dollars. It's an impressive chart and shows that gold's uptrend remains clearly in place. Note also that its 200-day moving average is about to climb above $500, which I think adds more strength to my view that gold is never going back below $500. There's just too much paper money waiting on the sidelines to buy physical gold on pullbacks.

The silver chart is also impressive.

I last presented this chart in my alert dated April 2, 2006. Silver continues to make good upward progress and seems destined to fill the potential offered by this chart pattern.

Lastly, here's the chart of the gold/silver ratio.

The ratio underwent a big correction this week as silver slipped back after nearing $15. But the ratio remains in a major downtrend, suggesting that as the metals continue in their upward path, silver will still be leading.

Lastly, watch the US dollar closely here. It looks increasingly bearish and ready to head lower. I'd like to end with a comment from my alert of April 9th: "There are already enough bullish fundamentals underpinning both gold and silver. So the precious metals don't need more bullish news for them to climb higher, but if the dollar starts falling again against the euro and other major currencies, it will indeed be more bullish news for gold and silver."

Published by GoldMoney
Copyright © 2006. All rights reserved.
Edited by James Turk, alert@goldmoney.com

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