why is sbl ev/oz soo low?, page-8

A technical article on the POG along with a couple of articles on where Gold Mining stocks might head. Every argument has it's counter and just goes to show how complex markets have become.

Always DYOR.

Weekly Commodities Update: Gold

Monday, April 25, 2011

By Jonah S. Ford

The $1,500 per ounce barrier was broken in the gold market last week for the first time ever, as the US Dollar extended losses against the Euro and other major trading partners, and crude oil remained in a firm uptrend. The ominous outlook for price inflation coupled with no end in sight for the central bank intentions to keep printing money to maintain the global stimulus effort.



As the Dollar falls, the price of dollar-denominated commodities overall continue to rise, with gold being the longstanding benchmark for a safe haven from inflation. Because the debt loads continue to rise in both the US and the European Union, as well as quake-stricken Japan, the markets are beginning to resign themselves to the reality that the monetary policies that govern these economies are not only comfortable with inflation; they view inflation as a solution to many of the problems currently facing their budgets and revenue forecasts. More and more investors are shunning low yielding bonds and devaluing cash, and turning to gold as an institutional grade asset to hold for the long term.

With that picture as a fundamental backdrop, the potential for gold to continue rising remains quite strong. Only after a sustained economic recovery marked by rising wages and falling unemployment will the central banks be able to begin raising interest rates to the extent needed to offset inflation and restore stability to the currency markets.

The technical outlook is also supportive for the price of gold. Most extreme bull markets will end in a parabolic spike higher near the end, followed by a crash as fewer and fewer traders are willing to pay the ever-higher prices, and early buyers begin selling to book windfall profits.

So far however, the rally in gold has been impressive but very orderly. The latest run into the $1,500 per ounce handle developed within a Rising Channel chart pattern, shown here on the 240-minute time interval. This is what technical traders refer to as "a sustainable angle of ascent", meaning the market has not yet gone into a parabolic rise, and the gradual increase in prices may well continue.

Near term resistance provided by the upper band of the Rising Channel may set up for a short term correction back to support near the $1,480 level, but the longer term potential for still higher prices remains very much intact.

http://www.goldpricechart.org/gold-technical-analysis/weekly-commodities-update-gold-2/

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