$GOLD - Monthly

The monthly close for gold comes at the 12-year uptrend in the log scale chart. The correction in the gold price was big enough to justify an elliot wave count, meaning that the process of completing a '5' wave has started.

One thing that people tend to ignore is the source of the policy rate, which is set by the market on the short end of the yield curve. My assumption was that short term interest rates would go negative, due to massive liquidity demand pressures. Open market operations are changing this scenario, as they have on the long dated treasuries.

With a sudden rise of short term interest rates, this indicates a massive influx of short term money, which will affect the gold price rise. As long as real interest rates remain negative and nominal interest rates remain at par with gold lease rates, then gold can trade sideways for an extended period. If that occurs, then gold should be trading in the ~$1800/oz. range for several months. The benefit will obviously be with the miners, rather than the ETFs.

One thing that might change that is if gold goes into backwardation. The ongoing Greek default is no different than a creditor's arrangement under court protection, but disorderly bankruptcies can occur in the financial sector as a result:

http://finance.yahoo.com/q/fc?s=ZGG12.CBT

supersize: http://www.flickr.com/photos/11747277@N07/6801100361/sizes/l/in/photostream/

stockcharts.com

-F6