The Stealth Rise of Gold (The Chart Says It All)

Feb. 10, 2012 - PRLog -- Gold finished the month of January 2012 with a gain of more than 10%.

Initially, we got the impression that this precious metal is up so much for the first month of the year, it is ripe for a pullback. And that may be correct.

However, the chart of gold is incredibly bullish...

Check out the weekly chart of gold going back nearly three years!

(As you can see clear as day, gold is forming an ominous double bottom technical formation, represented by the large “W” pattern that began forming last September 2011.

This “W” pattern is so huge and so clearly obvious that we believe we’re going to witness an explosive breakout to the upside in gold.

The top of the “W” is about $1,800 USD with the bottom being about $1,500 USD. The difference is $300 USD. Add that to the $1,800 USD if we get a breakout, and the target level is $2,100 USD. And that’s the minimum price target for gold.

Who knows where it goes from there...

As soon as gold breaks out from its “W” pattern and reaches $2,100 an ounce, then that would be a 21% gain from current levels.

Regardless of prospective price weaknesses, Newcastle Distributors' market analysts believe there are good, solid reasons to expect gold prices will be much higher by the end of 2012 . . . and still-higher in 2013 and beyond.  Some of these are:

1. Inflationary U.S. monetary and fiscal policies -- past, present, and future -- along with the coming second dip in the U.S. business cycle that will force the Fed to yet greater volumes of quantitative easing and monetary creation.

2, Europe's intractable sovereign debt crisis -- which has greatly undermined the euro's appeal as an official reserve asset and competitor to both the dollar and gold -- and is pushing the European Central Bank to pursue inflationary monetary policies much like the U.S.  

3. Continuing moderate, self-sustaining, rates of economic growth in the "gold-friendly" newly industrialized or emerging economies - especially, and most importantly, in India and China.  Rising incomes will support gold demand in these two countries sufficient to drive gold prices higher this year and beyond.

4. Rising net buying by the official sector, principally the central banks of a number of newly industrialized or emerging nations that wish to diversify reserve assets and avoid dollar-related risks.  

5. Similarly, rising private-sector investment demand -- reflecting fear of inflation, currency depreciation, and a loss of confidence in Western governments to deal effectively with today's economic challenges.

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