Despite its recent weakness, the world is still viewing gold as a store of
value.
Overall demand remains strong. As Eric Sprott points out, " It's staggering
to think demand for gold is twice global mine production."
China is now the largest gold buyer and producer in the world. And with their
economy looking better, gold continues getting a big boost from this area.
Gold's steps are your friend
For now, all is still good on the basing front. And our best bet is to keep
track of the stepping stones because gold is at a crossroads.
They served us well on the way up, and they'll serve us well now.
Chart 1 shows gold's steps, along with its mega 23 month moving average.
Briefly, during the up moves, the C peaks generally marked the support for
the future D declines.
This was a bull market check point.
The interesting point today is that the low in June near $1200 is still higher
than the prior C peak in 2008.
This is technically a good sign and if $1200 holds, it'll be a bullish signal.
The C rise up to the 2011 peak was an unusually long C rise, but the D decline
has also been unusually long. This means, on the downside, if the June low
is clearly broken for a few days, we could then see the $1000 level tested,
the 2008 prior C peak.
If so, the entire post financial crisis rise would've been erased. This would
probably be the worst case scenario.
What's best to buy & keep
Many have asked if CEF and GTU are safer and better to hold than the gold
and silver ETFs, like GLD and SLV.
Both CEF and GTU are Canadian gold and silver funds that are backed up by
gold and silver in their funds.
This is not necessarily the case with the ETFs. Many rumors are flying that
the Comex gold warehouse supplies are way down, and during the mad ETF selling
last April-May-June, China was picking up a lot of that same gold and silver.
For reasons of safety, you know gold and silver are stored with CEF and GTU,
but you'll never really know about the ETFs.
In today's world, safety is important, and keeping the physical metals in
your possession is always best, followed by CEF and GTU.
Follow the bankers
When price manipulators take the gold price down, central banks see value
and buy.
Mario Draghi, the head of the European Central Bank (ECB) said it well when
he explained,
" I never thought it wise to sell gold because for central banks this is a
reserve of safety."
He also said it gives non-U.S. dollar countries a good protection against
fluctuations of the dollar.
This is clearly a different view than Ben Bernanke's view that nobody really
understands gold prices. He doesn't seem to enjoy talking about the barbarous
relic, but stay tuned.
