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Weldon Money Monitor


That was my gold bar!


Of particular interest from the macro-monetary perspective is the chart below in which we 'adjust' the price of spot gold, by the 'value' of the spot U.S. Dollar Index (divisor-basis). We note that the most recent low in the adjusted gold price came dead-on both, the 38% Fibonacci retracement from the Q1-2003 low, and the 61% retracement from the Q2-2004 low while mapping out a clear-cut A-B-C corrective pattern. Also, note the directional reversal to the upside in the long-term MA.

Voila! ... we note the upside leadership in gold, relative to the U.S. dollar, as prices begin to surge again, creating the same potential intermarket dynamic seen when the bull market began in 2001 and 2002, and right on into 2003. The decline in dollar-adjusted gold was deeper, because of the stronger upside correction in the dollar, than downside correction in gold.

Succinct and simple is defined below looking at the pure secular trend, as measured by the 24-month exponential moving average of the monthly closing spot gold price.

Succinctly and simply, an A-B-C correction to the 1968-1980 bull market ended in 2001, when the 50% Fibonacci retracement level held solid as support for the MA at $275.

Succinctly and simply, the downtrend line in place since 1981 has been violated to the upside, and, the interim high set during June of 1996 at $388 (basis the MA high) has been violated to the upside.

Succinctly and simply, while we remain fearful of disinflation risk as pertains to our Macro-Event Horizon theme, we also note that energy is making new highs, and investors are exhibiting a renewed interest in selling the dollar while buying 'stuff' despite ten consecutive rate hikes from the Fed and a completed tightening cycle from hawkish-leading Anglo Central Banks in the U.K. and Australia (note, one cut rates and the other eliminated their tightening 'bias').

Thus, global central banks continue to focus on the monetary debasement of paper currencies, as the sole means of support, for a debt-driven global reflation.

This is the secular, macro, monetary bull case for gold.

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