The One Line to Watch For Where Gold is Heading

Since 2011, the Fed and other global Central Banks have injected over $2 trillion into the financial system. They’ve also announced plans to continue pumping money ad infinitum.

And yet for the period from 2011 until two weeks ago Gold, the inflation hedge of choice for investors, hasn’t done much of anything.

Why is this?

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Part of it has to do with simple sentiment. Gold was overextended in 2011, stretched far away from its primary trendline:

On top of this, investors had gone too carried away on expectations of more Fed liquidity. QE 2, which was announced November 2010, was a mere $600 billion (not much compared to the Fed’s current programs which will extend forever). But yet Gold rose like a rocket ship starting in August when the Fed first hinted at QE 2.

Which brings us to today. This excessive enthusiasm needed to cool and Gold has done just that for the last two years. Then the Gold Crash happened and were right back at the long-term trendline.

The is the key area to watch. If Gold continues to correct, then we could go to $1200. But Gold should hold up here as ong as the long-term trendline remains intact.

We’ll have to see. But reports of incredible demand for the precious metal are ubiquitous.

Source: http://www.zerohedge.com/contributed/2013-04-24/one-line-watch-where-gold-heading


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