Gold prices struggle back to where they were two weeks ago and still $120 an oz off the $1790 reached immediately before Ben Bernankes’ address to the Senate Budget Committee.
Looks like a job well done as confidence in gold has remained undermined. The latest utterance from “Helicopter“ Ben has been interpreted as a further round of quantitative easing, or whatever name they wish to call pumping fresh money into the banks, is not that far away.
That explains the $30 rise in New York at the open. The fact that the Indian jewellers strike in protest at the doubling of import duty on gold is still not over, that Indian gold imports are expected to drop by a third this year, that the worlds largest bullion holding ETF shed ten and a half tonnes last week and that the New York Comex reports that the speculative net long position fell 15.4% last week to its lowest level since early January does not sound much like a short term bullish scenario to us. But, as usual the market never ceases to amaze and confound.
Gold’s Solid Foundation of Investors
Our take is that there is a solid foundation of investors in gold, both big and small, who probably got in early on the bull run and who would have to see a drop below, say, $1500 an oz before considering pulling out.
The remainder of the run up to $1920 last September and the subsequent volatile price action since then being due to shorter term speculative positions jumping in and out of the market according to the spin Bernanke et al drivel on about the US and European economies.
Gold Drives Precious Metals
For those of us following the ebb and flow of precious metals, gold is the driver and takes pole position, the rest, silver and PGMs, more or less have been following suit for around two years and are likely to continue to do so for the foreseeable future.
That brings us to the conclusion that playing gold and precious metals in the short term is a dangerous game, even the most skilled technical analysts have little or no clue and cannot agree how this market is going to play out over the short term of three months or so.
Gold Will Inevitably Hit $2000
In the longer term we see gold inevitably hitting $2000 and more, the question is whether to take advantage of the present price to load up, or maybe wait to see if it reverts to its earlier low of $1500 in the next few weeks where there seems strongish support.
The alternative point of view may hold attractions for the more optimistic followers of gold, it is that the weak hands have been shaken out, that today’s rise may herald a return of confidence in the yellow metal and that this interruption to its five year bull run is done and dusted as increasing problems in the worlds economies keep to center stage.