Is Gold to Regain Momentum?

August 30, 2011 | By | Reply More

There are two things about the gold market we know for sure! The Indian wedding season when gifts of gold are a long standing tradition is starting and the seasonal slow down in gold’s upward momentum that has lasted during July and August since this five year bull run commenced, is coming to an end.

With fund managers,traders and investors returning to their desks from vacation, expect volumes in both stock and commodity markets which have been low throughout the period, to return to normal. For gold it is reasonable to expect that the volatility the metal has shown during during August will abate, as to an extent this was down to lack of volume as the market responded to news.

The shock of the margin increase is also behind us but do not be surprised if further increases occur if the price goes parabolic. Fiat currencies continue to lose confidence, central banks are still buying, the loose hands of the speculators have been shaken out, western economies continue to spiral into the second wave of this recession and the BRICS economies are beginning to look shaky.

Our only reasonable conclusion is that gold’s correction is now over. Talk of a bubble bursting was, (or even is) premature and although minor corrections will occur over the next few weeks, we strongly advocate taking any opportunity to buy at under $1800 an oz.

Europe Falters

Furthermore US and European stock markets are looking perilously close to free fall, with, to date, no solutions that look like saving the weak European economies of Greece,  Portugal, Ireland, and Spain from default. Even France and the UK are becoming under threat, all with dire consequences for the US banking industry.

Election Year Will Pull Some Rabbits Out Of The Hat!!

On the other side of the picture it is becoming more likely that a further round of quantitative easing or similar will be forced upon Bernanke as the U.S. economic data goes from bad to worse.

The swings and roundabouts of the stock market in the last few weeks are hard to understand although the low volumes have played their part. The present upward movement may well be in anticipation of a new Bernanke incentive but past results have shown little or no benefit to Joe Public and seem  unlikely to do more than temporarily reverse the decline back into recession.

Having said that remember some rabbits will have to be pulled out of the hat as the Presidential election draws near and those investors that can anticipate that stimulus will do very well indeed.

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