Three Reasons Gold Will Continue on Strong Upward Trajectory

Traders and investors worth their salt will always look to news, fundamentals, trends, and overall market sentiment before entering a position. My bullish take on gold is no different. I will not hypothesize on the precious metal’s year-end destination (I will for silver) as many exalted gold bugs, like John Paulson, have been stymied by the rapid growth in its value.

Check 1: Gold has been in a long-term uptrend and is in no danger of breaking this upward channel. Only a massive increase in supply or an exponential increase in the value of the dollar would knock it off its strong upward trajectory. I know it’s a cliché but when all else fails, the trend is your friend.



But when the trend breaks the cradle will fall, so it’s good to be prepared. With that in mind SmartStops has the short-term and long-term stops for the SPDR Gold Trust (GLD) at $150.55 and $143.12


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Check 2: As anyone who's taken an economics class can tell you, the fundamentals of market dynamics are supply and demand. The simple truth is the demand definitely exceeds the supply. That gap may very well increase substantially in the near future, when the Pan Asia Gold Exchange opens.

Speaking of Asia, the good citizens of China and India historically are buyers of precious metals in the second half of the year for their religious festivals and the height of their wedding seasons; this translates to more demand.

Check 3: On Tuesday, President Obama suggested that the “Gang of Six” US senators had created a plan that may be the way we overcome our debt ceiling impasse. I am a bit more skeptical, but regardless, the recent surge in gold prices has less to do with our debt and more to with the sorry state of affairs in southern Europe. As long as Italy, Spain, Greece, Ireland, and Portugal teeter on the abyss of default, this upward trend may well continue.

Editor's Note: For more, visit SmartStops.net.