Scary Triangle For Gold

Yesterday, Standard and Poor's revised their credit outlook for the US from negative to stable. As Peter Schiff tweeted, ‘despite rising rates and mounting debts S&P upgraded U.S. credit outlook. It looks like that Federal lawsuit helped S&P get its mind right.’

The ratings agency saw the fiscal consolidation plans as a positive for the economy, ‘the dynamics in Washington are not likely to get substantially worse in the medium term.’ The chances of a downgrade, according to the agency, are now less than one in three.

The revision saw the gold price weaken early this morning after the US dollar strengthened. Analysts believe that the positive economic data coming out of the US and support from S&P will place gold in a weak position.

As we mention in The Social Gold Mine, today, Fed Hawk President James Bullard said that even he did not favour a pullback in bond purchases whilst inflation was so low.

Here in the UK, we could be doing with a hawk of our own (one who isn’t for turning). Axa Life Europe yesterday reported that annuity rates have fallen by 29% since QE in the UK began. Sir Mervyn King has previously expressed sympathy for those living off pensions but insists that monetary policy is set with only inflation in mind. For all the talk of gold’s fall from grace, such theft of savers from their pensions is rarely reported. Those who had chosen to diversify some of their savings into gold investment would at least be looking at the same amount of gold, unlike the cash in the bank.

Some technical analysis now, from the Bank of America Corp: Thanks to the ‘well-defined symmetrical triangle’ it has formed since April 16th Gold is likely to drop to its lowest level since 2010. The bank expects it to fall to as low as $1,250/oz over the next month.

However, in other technical analysis, UBS AG believe that the brief recovery seen in gold during the last three weeks is now over and that the bear market which began in April will contue. The bank sees gold going to $1,303 an ounce, – a 50% retracement of the rally seen between October 2008 and September 2011.

Dennis Gartman believes that should gold go below $1,350/oz then there’s likely to be ‘nothing’ to support prices going to as low as $1,200/oz. Remember, this is the same man who called the end of the bull market at the beginning of 2012 and then admitted he had been wrong. When Gartman made the bear call in December 2011, Peter Grandich said he would wager Gartman $1 million that gold would hit US$2,000 before it hit $1,000 on the COMEX.