What OMF Means for Gold

By: Gordon Long | Tue, Apr 2, 2013
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The Obama Economic Model

We ended almost every one of nearly 100 webinars in 2011 with "Don't Worry, They'll Print the Money". This is how confident my Co-Host, Ty Andros and I were that the global central banks had no other recourse but monetization.

We felt strongly that the western economies had passed the 'event horizon' and that the economic spiral was now inescapable.

Outright Monetary Financing or OMF is what presently lies in front of us as QE¥ ends and it has profound implications for precious metals.

The charts as we will show are signaling that the smart money sees this and are already quietly laying down their bets. These players include the central banks not presently part of the Currency Cartel. The path however is going to be tricky and the charts also show why.

The global central bankers are feverishly loading the helicopters, but these are helicopters like we have never seen before.

OMF - Cartoon - Helicopter Ben

We have been carefully observing that the global central bank balance sheet expansions have exhibited the following:

CB6 Balance Sheet (USD)

Charles High Smith and I recently laid out how large central bank balance sheets could grow and what were the 'limiters'. It appears that a collapsing currency is no longer the 'limiter' it once was but in fact is now a goal as the global currency wars heat up.

Gold as shown below has tracked amazingly close to the cumulative growth in the balance sheets of the ECB, PBoC, BOE, BOJ, Federal Reserve and SNB (cumulative values of this group are reflected in the chart above and below).

Gold vs Central bank balance sheet


Gold Signaling a Completing Consolidation

One of the more predictable technical analysis patterns is a flat bottomed triangular formation indicating a consolidation. The Descending Triangle is more about time targeting than price targeting.

Gold is suggesting that we have a smaller 'DE' wave combination to complete the standard 'ABCDE'. it will tax the patience of gold investors and the pocket books of the options players as time decay is a killer. Our SPX analysis has suggested for some time that we expect a market scare between April 15 and early summer which would match gold's 'DE' timing.

Gold has Traded in a Volatile, but Well-Established Range since August 2011

Indication are strongly pointing to the 'heavy OMF helicopter' lift off to be in late Q3. We have labeled this as the Great Reflation - Part III.

We do a lot of work with Fibonacci Ellipses and they have proven extremely accurate within this central bank controlled environment which we are presently witnessing. We refer you to: REDUX: Beware the Ides of March.

Our Fibonacci Spirals (below) has confirmed the consolidation pattern with a high probability.

GOLD Daily Chart April 2, 2013

GOLD Daily Chart April 2, 2013

GOLD Daily Chart April 2, 2013

A couple final charts show that in the larger context, a lift in gold with a correcting equity market should not be unexpected.

Dow/Gold Ratio - 200 Years Chart

Dow/Gold Ratio - 200 Years Chart

As we have done since 2011, we end this note with:

"Don't Worry, They'll Print the Money!!"

Money Printing Cartoon

 

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Gordon Long

Author: Gordon Long

Gordon T. Long
Publisher - LONGWave

Gordon T. Long

Gordon T. Long has been publically offering his financial and economic writing since 2010, following a career internationally in technology, senior management & investment finance. He brings a unique perspective to macroeconomic analysis because of his broad background, which is not typically found or available to the public.

Mr. Long was a senior group executive with IBM and Motorola for over 20 years. Earlier in his career he was involved in Sales, Marketing & Service of computing and network communications solutions across an extensive array of industries. He subsequently held senior positions, which included: VP & General Manager, Four Phase (Canada); Vice President Operations, Motorola (MISL - Canada); Vice President Engineering & Officer, Motorola (Codex - USA).

After a career with Fortune 500 corporations, he became a senior officer of Cambex, a highly successful high tech start-up and public company (Nasdaq: CBEX), where he spearheaded global expansion as Executive VP & General Manager.

In 1995, he founded the LCM Groupe in Paris, France to specialize in the rapidly emerging Internet Venture Capital and Private Equity industry. A focus in the technology research field of Chaos Theory and Mandelbrot Generators lead in the early 2000's to the development of advanced Technical Analysis and Market Analytics platforms. The LCM Groupe is a recognized source for the most advanced technical analysis techniques employed in market trading pattern recognition.

Mr. Long presently resides in Boston, Massachusetts, continuing the expansion of the LCM Groupe's International Private Equity opportunities in addition to their core financial market trading platforms expertise. GordonTLong.com is a wholly owned operating unit of the LCM Groupe.

Gordon T. Long is a graduate Engineer, University of Waterloo (Canada) in Thermodynamics-Fluid Mechanics (Aerodynamics). On graduation from an intensive 5 year specialized Co-operative Engineering program he pursued graduate business studies at the prestigious Ivy Business School, University of Western Ontario (Canada) on a Northern & Central Gas Corporation Scholarship. He was subsequently selected to attend advanced one year training with the IBM Corporation in New York prior to starting his career with IBM.

Gordon T Long is not a registered advisor and does not give investment advice. His comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to buy or sell a stock, option, future, bond, commodity or any other financial instrument at any time. While he believes his statements to be true, they always depend on the reliability of his own credible sources. Of course, he recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, before making any investment decisions, and barring that, we encourage you confirm the facts on your own before making important investment commitments.

The information herein was obtained from sources which Mr. Long believes reliable, but he does not guarantee its accuracy. None of the information, advertisements, website links, or any opinions expressed constitutes a solicitation of the purchase or sale of any securities or commodities. Please note that Mr. Long may already have invested or may from time to time invest in securities that are recommended or otherwise covered on this website. Mr. Long does not intend to disclose the extent of any current holdings or future transactions with respect to any particular security. You should consider this possibility before investing in any security based upon statements and information contained in any report, post, comment or recommendation you receive from him.

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TRUE MONEY SUPPLY

Source: The Contrarian Take http://blogs.forbes.com/michaelpollaro/
austrian-money-supply/