Gold, USD and the DOW.

Gold has been on a rise since 2001(lowest figure). The way this figure is plotted is logarhytmic which reduces the actual rise to a percentage rise. The fact that this line is nearly a straight line reflects that gold prices are rising a steady percentage a year. This is a reflection of the fact that the FED increases paper money a certain percentage per year. Note that there were times when the increase in gold prices corrected; such as in 2006 (when gold dropped from 700 to 550) and in 2008, when gold price dropped from 1000 to 700.

The graph one up from that is the relatively recent price change in gold. This is plotted on a linear scale. Pls note that gold broke out of its wedge pattern in September this year and did two rather classic upward moves: about 80 dollars up and 30 dollars down. In November, however, gold moved up as expected, but instead of correcting back, it added another month's worth of up move and then began to correct. Anti-gold forecasters touted the upmove as a parabolic blow off before the top. Gold began to slide since that time and is heading down today, erasing yesterday's gain.

Before you believe the pundits that gold is terminally on its way down, let me tell you about some anomalies and the fundamentals. Gold miner stocks are resisting the move down in gold, minimizing the drop on the downside and maximizing their upmoves (see the next graph up, THM, which is my favorite gold miner). The second anomalie is the tremendous change in UUP, contracts to buy dollars. Buying UUP is wiping out shorts in the dollar and the activity in UUP may be driving the rise in the dollar, which in turn lowers the value of gold. How far can that go? Quite far apparently, but somebody will suffer tremendous losses eventually. Of course, when the US govt covers your losses via bank loans on which they pay profits... The Obama regime is determined to show that the Country and its economy are doing well, but that is an illusion. The third anomalie is what is happening to gold and dollar prices. Yesterday, gold went up in the Asian markets, today there is a big down move in New York. Are the Asians given a chance to get out of the dollar at a good price?

Finally, gold prices rise to reflect the printing of paper currency. This trend can be countervailed for a time, but not permanently.

At the present, gold prices briefly dropped below 1100. Is this the bottom? I do not know, but I still believe that gold will hit 1500/oz next year. The DOW? One very knowledgeable analyst says that the DOW needs to rise to 10,800 for us too be out of the Bear Market. We are near that, but it remains elusive.