The Last Hurdle

On January 21st, 1980, gold closed in New York at $825.50. Earlier that day the London PM gold fix was $850, a level that gold has not yet exceeded.

Gold has closed in New York at new monthly, weekly and daily record highs. It has closed in London at new monthly and weekly highs. Thus, that $850 price from the January 21st, 1980 PM fix remains gold's last hurdle before breaking into a new all-time high. It seems likely that this last hurdle will fall soon, sending gold into uncharted territory.

While a short-term correction can occur at any time, the following chart is very bullish. Therefore stay with the major trend.

Last week silver broke out of the pennant consolidation pattern it had been forming since last year, which is a major bullish event.

Importantly, gold and silver are no longer diverging. Both precious metals have now exceeded their May 2006 high. Silver has finally confirmed the uptrend in gold, which bodes well for both precious metals in the immediate future. This confirmation of the major uptrends in both precious metals is classic bull market action.

Meanwhile, we are seeing classic bear market action in the dollar. The US Dollar Index made another record low last week, amid an eerie sense of calm. No one seems to be bothered by what is happening to the dollar.

Where's the outrage that the purchasing power of the dollar is disappearing? Where's the panic that the dollar is headed to oblivion? There is none, at least not yet anyway. My conclusion therefore is that the dollar has much further to fall.

Importantly, the downside momentum in the dollar continues to build. I have added an arrow to the following chart to highlight this downside momentum.

When taken together, the eerie calm as the dollar collapses and the arrow in the above chart pointing to the building downside momentum suggests that the dollar is nowhere near its final low.

In the last alert I noted that "the dollar is falling off the edge of a cliff" and that "the possibility of a dollar collapse is both real and imminent." I then went on to ask: "Could a dollar collapse cause gold and silver to rocket higher?"

The probability of this outcome has now increased because silver finally broke above its May 2006 high. The probability of a dollar collapse and a moon-shot in the precious metals will increase further when/if gold climbs above its last hurdle.

Published by GoldMoney
Copyright © 2007. All rights reserved.
Edited by James Turk, alert@goldmoney.com

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