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Tuesday, January 22nd, 2019 - Buy Gold - Bringing you trusted gold news and gold investing information since 2006

Is Gold’s Climb Coming to an End?

As gold pulls back the question lingers as to whether this is the beginning of the end, and some hardcore believers find themselves looking to the heavens for answers.

As the background delivers a weaker dollar and higher inflation (but not core), the usual arguments to own gold and the commodity’s price movements are hard to consolidate with the economic data and long held beliefs. As I have pointed out before in an article on October 1, 2010, “… isn’t gold a hedge against inflation? Never was and will never be. It’s a hedge against instability.” As of now the perception is building that the world is becoming very stable, and the successful, although temporary, resolution of European financing in the short-term is removing the underlying impetus for the commodity.

Unfortunately the cycle will become self-feeding because of the large holdings by the investment community, especially ETFs (GLD), and they have no reason to hold it except for the inflow of cash that keep the funds humming along. As the “cashing-in” takes place, funds will be forced to dispose of their “inventory,” building up pressure and exacerbating the move.

In the end, the process only amounts to normal market gyrations while underscoring the fact that gold, like all other “hard assets,” is as vulnerable as a pet rock. Where to now? The 200 Day Moving Average yells $1,285 although there are some support zones in between. Actually, and coming from a non-gold bug, a pull back will be a healthy development because, if the long-term trend is to hold, the lower prices will build the gold haters on the short side. The story is much different if the price goes below $1,250 – and holds for a while.

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Gold is like a religion: There are lovers, haters and agnostics. The lovers become haters, and haters learn to love depending on market conditions. The agnostics don’t care, and play as long as there is a profit to be made.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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