by John Galt
May 6, 2012 12:25 ET
There are many people willing to deny basic economic reality or the news that the manipulated government data points from around the world are sending, however gold and the gold ETF (GLD) continues to flash a warning clarion that can not be missed by any observer. Unfortunately for the naysayers, gold is still the final resting place for value and is indeed viewed as the alternative world currency by major economic powers such as China and Russia. The U.S. Dollar has had a nice run and with the impending collapse of the European Union as constructed appears imminent, another surge in the U.S. currency should be expected. Thus a review of the warning from gold is warranted considering the horrible technical action this year and what the desperation to raise cash will create with a once in a lifetime opportunity for the wise to buy gold at a discount.
The first chart of importance is the three year daily chart of the GLD ETF, a good reflection of how speculators and major financial corporations are playing the gold market in a similar fashion to the late 1970’s:
(Chart from StockCharts.com)
The chart above shows the recent ominous technical formation which recently occurred in the GLD ETF and of course physical gold. This is the first “Death Cross” technical formation since September of 2008 as the chart below illustrates:
The events of 2008 are well documented but the question has to be asked at this moment:
Are the world’s central banks going to allow another period of deflationary panic to engulf the world financial system?
The gold chart in 2008 said “yes” and the loud warning and results caused many talking heads to call an end to the gold bull market:
30% from peak to intraday low was a destructive market force wiping out many paper bulls and short term players in the market. Those who had faith in the Bernank and other central bankers realized that this was a key buying opportunity and the intelligent speculator doubled their investment in gold in less than three years thanks to the bungling of the political and financial elites. If a 30% correction were to occur in this current market, something I would not dismiss, a buying opportunity of one’s lifetime will be available for those souls willing to buy and take possession of physical gold (and silver) at multi-year low prices. Many of the idiots will return to the airwaves once again to proclaim the end of gold as an investment vehicle but in reality, it will set the table for a late 1970’s early 1980’s style super spike in prices which will carry the metal to well over $4000, perhaps $5000 per ounce in very short order.
Considering the threats of war and financial collapse in Europe and the Middle East this summer and fall, the charts might well be telling of a conclusion which is both logical and economically devastating for those who have not made adequate preparations.