Buying Gold and Selling The Dollar
More and more people are buying gold because they have no more faith that the pieces of papers they carry in their wallet have the persistent value to exchange for goods and services. This is because unlike gold, fiat currencies like the U.S dollars are not backed up by anything. Nowadays, fiat currencies are not even useless papers, they have become electronic numbers for book keeping purposes. The value of fiat currencies is only as far as the masses don’t start to dump the papers and start buying gold if they start to distrust the anticipated purchasing power of the papers.
Bernie Mac has announced that the U.S Federal Reserve will pump another $600 billions into the U.S treasury market. This second edition of Quantitative Easing (QE2) by the Fed has made the total spent of QE to reach almost $2.3 trillions. What Bernie Mac has done is to add 3 times as many dollars into the world’s dollar supply than all Fed charmen have done. It’s easy the create fiat money as all you need is paper, ink and a good printing press! Paper money is limitless. That’s not the case for gold. People are beginning to realize this and more are buying gold. The reason is simple – gold is the real money and it is limited. It requires gold mines, miners and expensive equipment.
When more people ditch fiat currencies and start buying gold, the value of fiat currencies will inevitably drop. In fact, the U.S dollar has lost around 33% of its value over the past 10 years. In contrast, gold price has increased from $300 per ounce to over $1400 per ounce now. The U.S Index may be on a temporary upswing. In order to sustain its value, fiat money need the faith from consumers and investors, something it dearly need now. In the meantime, people are converting their fiat currencies into something tangible and has real value – by buying gold and silver.
More People Are Buying Gold – It’s In The Chart
The best way to do before you start buying gold is to look at the gold trading chart. The gold trading chart is currently exhibiting a possible bearish head and shoulder formation. But this is yet to be confirmed. This may not be a major concern based on the gold trading volume. There is a relatively higher volume when gold trading price is rising and lower volume when prices are declining. This shows that more people are buying gold than those who sell gold.
Gold’s price has been stopped recently at the intersection of several resistance lines but daily volume levels and other signs indicate gold’s next move is likely to be up. Such a move would immediately invalidate the bearish head and shoulder’s pattern and would likely result in a suggestion on our part to increase speculative positions in gold, silver, and mining stocks.
Gold trading price is currently consolidating and is range bound within a trading channel. However, daily volume and other indicators seems to point to the next move for gold is likely to be up. If it move above the high of the right shoulder of the bearish head and shoulder formation, it would likely indicate a continuation of the uptrend in gold trading price. If this happens, our medium term target for gold trading price to reach $1,600 per ounce remain valid.