Clive Maund
gold, silver, & oil shares


GOLD reaches 1000 euros - reversal imminent?...

originally published May 17th, 2010

Gold has had a wild ride against the euro, but there are signs that it is about to burn out. While we cannot rule out continued vertical ascent involving it busting out upside from the channel shown on our 3-year chart, this would be an extremely serious development as it would mean the euro going into freefall implying a breakup of the European monetary union. Experience has shown that once things reach this extreme state “the rabbit is pulled out of the hat”, and leaders take some 11th hour action that eases the state of crisis - this is what we can therefore expect to see in coming days or even hours. So let’s see what happens.

If gold in euros reverses here, it obviously means that the euro will rally and the dollar drop. Gold has achieved a major milestone by arriving at the magic level of 1000 euros an ounce, and once this sticks it can expected to bring in a lot of European buyers, but right now, in this critically overbought state, it is at a nice round number level to book profits.

According to traditional logic gold going into reverse against the euro should mean that it rallies against the dollar. However these are not normal times and as you have probably observed, gold and the dollar have both been rising in recent weeks in response to the euro crisis. Even if we also see a reaction in gold against the dollar it is unlikely to be significant, as in the fiat race to the bottom, the baton will simply be passed temporarily from the euro to other currencies. Generally gold is set rise against nearly all currencies going forward.