Honest Money Gold and Silver Report: Market Wrap

By: Douglas V. Gnazzo | Sun, Oct 19, 2008
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Market Wrap

Week Ending 10/17/08

Gold

The following snippet is from the full market wrap that can be accessed at Honest Money Gold & Silver Report.

The weekly chart shows gold breaking below the important $850 level and closing at $787.70, for an 8% loss for the week, putting gold into negative territory for the year.

The $730 level looms below. As of now, the earlier Sept. low has not been breached and it may offer support for a higher low to hold.

Gold must regain the $850 level as it represents a twenty year high that was recently broken above turning long term resistance into support.

Price has now broken below $850 turning it back into overhead resistance. If the gold bull market is to stay alive the $850 level must be regained.

Asset deflation continues to spread from one sector to the next. The unraveling of the financial system has seen the Fed and the Treasury react by throwing more money at the problem.

This is just adding more fuel to the fire. Inflation is being baked into the cake and will rise in due time. If such policies continue unabated, hyperinflation could result.

Gold and the U.S. dollar tend to move in the opposite direction from one another: gold up = dollar down; dollar up = gold down. Recently, the dollar has been rising and gold has been falling.

The daily chart of the dollar below shows a negative RSI divergence with a series of lower highs - suggesting that a change in direction may be coming.

Sitting in cash and gold is the safest position for now. The return of capital is more important than the return on capital during times of financial instability.

About the only thing that appears certain is that Bernanke and company stand ready to supply whatever amount of liquidity (credit/money/debt) the system requires to keep it going. The cure may end up being worse than the disease, however.

The problem is the proliferation of debt that is drowning the world. To create more debt is not the answer. Such debt creation guarantees the purchasing power of the dollar will decrease. The devaluation of the dollar is gold positive.

Good luck. Good trading. Good health, and that's a wrap.


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Douglas V. Gnazzo

Author: Douglas V. Gnazzo

Douglas V. Gnazzo
Honest Money Gold & Silver Report

Douglas V. Gnazzo is the retired CEO of New England Renovation LLC, a historical restoration contractor that specialized in the restoration of older buildings and vintage historic landmarks. Mr. Gnazzo writes for numerous websites, and his work appears both here and abroad. Just recently, he was honored by being chosen as a Foundation Scholar for the Foundation of Monetary Education (FAME).

Disclaimer: The contents of this article represent the opinions of Douglas V. Gnazzo. Nothing contained herein is intended as investment advice or recommendations for specific investment decisions, and you should not rely on it as such. Douglas V. Gnazzo is not a registered investment advisor. Information and analysis above are derived from sources and using methods believed to be reliable, but Douglas. V. Gnazzo cannot accept responsibility for any trading losses you may incur as a result of your reliance on this analysis and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities. Do your own due diligence regarding personal investment decisions. This article may contain information that is confidential and/or protected by law. The purpose of this article is intended to be used as an educational discussion of the issues involved. Douglas V. Gnazzo is not a lawyer or a legal scholar. Information and analysis derived from the quoted sources are believed to be reliable and are offered in good faith. Only a highly trained and certified and registered legal professional should be regarded as an authority on the issues involved; and all those seeking such an authoritative opinion should do their own due diligence and seek out the advice of a legal professional. Lastly, Douglas V. Gnazzo believes that The United States of America is the greatest country on Earth, but that it can yet become greater. This article is written to help facilitate that greater becoming. God Bless America.

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