The gold rally begins in earnest.

I have been relaying to you the forecasts I read and my own on the expected rise in gold prices. Let me summarize. Many people believe that gold will go much higher. The disagreement is how high and how fast.

The first graph shows the value of GLD, an exchange-traded fund that tracks gold exactly. Note that gold rallied strogly during the end of 2008 and into 2009, then began to trade sideways in March 2009 (when the Stock Market began to rally). Between March and the end of September, gold price described a narrowing wedge (lower highs and higher lows) - a pattern that suggests a significant coming change in the valuation of the security. A breakout from such a pattern can occur either on the upside or the downside.

Gold broke out of this narrow range just at the beginning of September. The previous high of 1037 was broken and new highs were established. A new pattern was established.

For now, gold seems to advance 80 dollars an ounce and decline 30. So the next leg should take gold prices to 1120. This is approximate. The reverse head and shoulder predicts gold price to go up to 1,300 in the interim with higher prices to come later. How high? 1,500 then maybe $2000. How fast? That's the question that we do not know.

Now to the fundamentals. The driving force for the increase in gold price is the loss of value in the dollar. The slow devaluation of the dollar is deliberate, carried on by the Obama regime. Lowering the value of the dollar achieves the following: 1. it transfers ownership of some of American assets to other countries and 2. it makes it possible for the Obama regime to keep up the pretence that America's debts will be paid. The enormous debts being piled up by the regime will be easier to pay if the the debt is paid by cheaper dollars. Why keep increasing the National debt? Because it can be used to grab control of industry after industry. The regime now controls nearly 3/4 of the banks, roughly the same amount of America's automobile industry, 80% of the mortgages, 100% of student loans and it is aming to bankrupt private health insurance. Commercial real estatate is next. All these industries are artificially bankrupted then "rescued" by monopoly money that the FED prints or borrows. Prices are kept in check by the continuing deflation caused by bankruptcy of industry after industry and the increase in unemployment this causes.

A time will come when prices can no longer be kept constant. At that point, price controls will be instituted, which will lead to shortages. This always happens when the Communists take over a country and country has been taken over by a bunch of radical communards.

So, gold rises, because the dollar fades. Owning gold simply preserves your capital, though the apparent gains will be taxed away. Gold mining stocks, however, will rise faster than gold prices.

The Stock Market will continue rallying. But, at some point the regime and its friends at the FED will have to raise interest rates to steady the dollar. That will wreck the Stock Market and even gold mining stocks will tumble. The alternative is to go into hyperinflation and destroy the dollar for sure.