Bosphorus_Capital
Short

Gold breaks 13 year old logarithmic trendline.

FX:XAUUSD   Gold / U.S. Dollar
Is the endgame going to be hyperinflation or deflation?

Hyperinflationists took gold             to new highs with the onset of super easy money starting with 2003             and broke all time records just shy of 2000 with QE1 and QE2.

Despite the speed with which M1 is being created in US, China, Japan, EU and UK (through various QE ), monetary velocity is still decreasing in the Western world since the 2008 crisis. Therefore, M2 and M3             which can hardly be inflated in the US through explosive student loans and various subprime junk, are already on a clear path to deflation in Europe. Soon the US and others will follow suit.

German Finance Minister Wolfgang Schaeuble says: “ I don’t think ECB monetary policy has the instruments to fight DEFLATION, to be quite frank.”

Gold             is clever. Gold             stopped betting on hyperinflation by 2012 and started betting on deflation against a backdrop of relentless M1 creation to the tune of $85 bn a month by FED. And now they say, they are pulling all that away too...

The value of cash is increasing as evidenced by the relentless USD rally which implies that the value of commodities are going to fall, starting with gold             and silver             . DXY             broke 85 resistance and is about to break multi year triangular resistance.

This clean trendline break in Gold             after 10 months of treading the trendline also clearly argues for deflation and dramatically lower gold             prices ahead. Technically, a pullback to 1270/1300 area can be expected before the downtrend resumes.
I think we need 2 or 3 months close below the support to draw conclusions. It can be just pinned or be a false signal.
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Well in 72 hours the month will close and probably not higher than 1240. :)
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