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Price of Gold Now Reinforces Uptrend
Pinnacle Digest writes: This past weekend we informed our members, in our weekend report, that selling pressure on gold would persist this week and we could see prices hit $1715. Despite the potential for such a pullback, if $1715 were hit, the uptrend would remain intact. This morning Adrian Ash explained why he also believes gold could see further downside, but that the uptrend remains in place.
It was yesterday when gold hit $1,730 an ounce, its lowest level since Bernanke announced QE3. However, this morning we’ve witnessed a nice rebound in prices as an ounce is trading for $1,743. The rebound in gold’s price this morning is largely due to news that Spain is prepared to request a formal bailout.
According to Ash, Spain is ready for a bailout from the European Stability Mechanism. Apparently the country does not need financial aid, but is making the request in order to enable the ECB to start buying its bonds. At least that is what a senior Spanish government official told the Financial Times. Boy do politicians have a way with words. In the real world, Spain is broke, desperately needs financial aid and is robbing peter so it can later on rob Paul.
According to Ash “A condition of the ECB's Outright Monetary Transactions program is that beneficiary nations have entered into a bailout program and agreed to deficit reduction measures before the central bank will buy its bonds on the secondary market.”
Inflation throughout the Eurozone averaged 2.6% last month, according to CPI data. Keep in mind that even though the inflation measurement is skewed, 2.6% inflation during a near depression in southern Eurozone nations is impressive. In a depression style environment, and even a recession, deflation reigns supreme as purchasing power dwindles away.
India is celebrating the festivals of Diwali and Dussehra. It was announced in the country that citizens will get a 7% discount on gold coins if they buy them from the post office. Given the huge demand spike seen every year at this time, thanks to the Indian festivals, expect strong support for gold around these levels given the added incentive for Indians to buy. India remains the largest consumer gold market in the world.
Click here to read Adrian Ash’s full report.