Not to be outdone with debt burdens, Japan has mortgaged everything down to the chopsticks for the remaining few in the next generation. Japan now sells more adult diapers than infant diapers as the population ages and the birth rate remains well below the replacement level needed. Japan, with well over 200% GDP debt level is near forced austerity, even if they don't admit it yet. The yen is near record strength against the dollar, a fall in the yen/dollar pair will, like the euro, result in bearish pressure on gold. Moving forward, increasingly anticipate Japan as a bearish catalyst for gold.


As I wrote in a recent article about oil leading the way for gold, falling energy prices are the final stake in the heart of inflation. The US Oil Trust ( USO) continues to make 2012 lows. Everything in the world depends on cheap energy, and cheap energy is here. Please read my article Attention Gold Bulls: Oil Is Leading the Way for my outline of why lower energy prices have killed inflation fears.

Along with USO, natural gas is also at historic lows. Natural gas is so incredibly cheap, trucks are actively moving away from diesel and gas to burn natural gas. A quick review of the monthly US Natural Gas fund ETF ( UNG) clearly indicates the current level of inflation fears.

I apply several proprietary technical analysis indicators as well as my favorites by Tom DeMark to arrive at price projections. I use several indicators for confirmation, and one relatively easy back-of-the-envelope method is described in Jason Perl's book DeMark Indicators. The high above the GLD monthly trend line is $185. Subtracting the value of the trend line for the same bar ($141) results in a difference of $44. Then subtract $44 difference from the trend line value at the price break. The price broke the trend line this month at about $158; $44 from $158 results in a price target of $114.

More convincing yet is the weekly and daily gold charts. Gold broke through this month and is now trading below the 60- and 90-week moving averages for the first time since January 2009. Look for moves higher in GDX, GDXJ, GLD, and IAU as selling/shorting opportunities.
At the time of publication, the author held no positions in any of the stocks mentioned, although positions may change at any time.

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