It’s no secret that Citi’s top chartist Tom Fitzpatrick is bullish on Gold. Earlier this week he reiterated his call that the yellow metal would head to
$3,500 in a few years.
Fitzpatrick offered more colour in some follow-up commentary published in King World News.
He employs his analogy of the “stairway to hell” which tracks the debt ceiling.
The recent “squeeze in Gold” has sent it significantly below this “stairway to hell” chart (Debt limit) which has continued higher. As we said earlier, we do not believe that this fall in Gold will be sustainable and expect new highs in the trend eventually. As we also said, we have retained a long-term target of about $US3,500 for some time on this Gold price based on a comparison of this period and that seen in the 1970’s….
“As we headed towards the last Presidential election there was a considered view in the markets that by the end of President Obama’s 2nd term the debt limit could be as high as $US22 trillion. Then we got the sequester, a more rosy economic outlook, tapering talk and all this has been forgotten. For how long?
The market dynamics above combined with the change of leadership at the Fed may well be “resurrecting that thought.” If so, our 2nd favourite Gold chart comes into play.
Fitzpatrick thinks that $US22 trillion debt limit will come within three years, which is when we could see $US3,500 gold.
“As we continue to spend more than we earn and shift that liability to the next generation, Gold has shown itself to be a very effective hedge against that policy,” he said.
“We firmly believe that the Gold correction has “run its course” and that much higher levels will be seen in the years ahead.”
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