Gold Prospects : Short Term and Long Term

Divergent views on price movement of precious metals

 

There has been lot of talk since  mid march 08 when the precious metals corrected ,that with economic woes across the globe, the correction would be much much deeper owing to the liquidity crunch.But if you observe the daily candlestick pattern of silver(gold also ) since the aug 07 the prices have not broken 100 dma .It obeyed this time around also with a big jump up today .Since mid march it has been consolidating between 100 & 50 dma and a break above $ 18.5 ( cmp 18.48 )its 50 dma will generate an upward thrust again.

 

 The great deflation of 1930  whipped the Establishment and its central bank (the Fed), so they have spent the last 80 years building an institutional framework that automatically inflates whenever anything like deflation is visualised and so can be snuffed in the air.

Therefore, there will be no deflation in nominal terms, but a hyperinflation. The Fed has one and only one weapon, inflation. They won't blanch at destroying the US dollar. They will destroy, and are now destroying, the US dollar.This will result in super inflation and the prices for precious metals shooting thru the roof.

In real but not nominal terms the money supply will be shrinking in value during a hyperinflation, so will cause depression or chronic recession. The worse the inflation, the worse the depression.

The outcome of all this mess will be a hyperinflationary depression. Watch Bernanke: he is proving it now. He hasn't yet dropped money from helicopters to the waiting crowds below, but the government is sending checks -- big checks -- to everybody who paid taxes last year. And he is using the Fed to buy rotten assets from his Wall Street cronies, and loan them mega-bucks. The Fed has only the inflation gun, and they will keep on shooting it until the US economy sees the bottom of pit and peak of  hyperinflation. It may take a month or a year or five years, no one really knows. But there will be no deflation. So the gold/silver prices are headed more of north than in south in the medium term.

 

I expect a good upside level by may-mid june.