Four Important Charts

The following charts are providing us with a powerful message.

Gold has clearly broken out to the upside. Not only has it broken out from the consolidation pennant pattern formed since May 2006, it has also moved above the May 2006 high. Gold closed on Friday at the highest level since January 21st, 1980, the day it closed at the all-time record of $825.50.

In fact, on only four days in history has gold closed higher than the $731.40 recorded this past Friday. They are the January 21st, 1980 top and the three prior days leading up to it.

Silver had been underperforming, but it too has now broken above the downtrend line going back to the May 2006 top. The gold/silver ratio dropped 4.0% this past week, indicating that silver is starting to lead, which is the normal result in a precious metals bull market. Silver's upside breakout is an important indicator confirming the uptrend in gold is a significant event.

Much of the rise in price of the precious metals is the result of a decline in the dollar.

The decline in the US Dollar Index has been relentless. Now we can see in the above chart that the decline is starting to build some downside momentum, which could turn into a rout in the weeks immediately ahead as people abandon the dollar and place their money in safer assets like gold and silver.

Interestingly though, the following chart shows that there is more to this advance in gold than just a reaction to a decline in the dollar. Gold has broken out against the euro.

Why is gold moving up against the euro? For the same reason gold rose against all the currencies of the world in the 1970's. Today's monetary problems like those three decades ago span far beyond the U.S.; they are global. We are witnessing a flight from national currency into the safety and security of gold. Expect more of the same. Expect gold and silver to continue climbing higher.

Published by GoldMoney
Copyright © 2007. All rights reserved.
Edited by James Turk, alert@goldmoney.com

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