Gold has risen $35 since the close last week to be only $4 off the high of $1760 reached on Feb 2nd and two months earlier on December 2nd.
Many gold followers felt that both these previous two highs signalled a return of the upward momentum the metal enjoyed for five years before consolidating in July 2011. Could this jump in price be the herald of the long expected gold break out?
Short Term Solution, Long Term Doubts
The settling of the Greek debt crisis for now has removed one element of uncertainty for financial markets, while at the same time today’s falls in European markets reflect the short term nature of the cobbled together Greek package and the continuing doubts surrounding longer term prospects for the southern nations of the EU.
On this front the old traders mantra of “buy the rumours, sell the news” is looking like sound advice. In the US there are signs that the nation is emerging from one of its darkest periods of economic stagnation, that is, of course, if you believe all that we are told in this, a presidential election year!
Anyhow both the Dow and S&P500 are both nicely up at the time of writing.
Far East Gold Developments Helpful
In such circumstances it would not have surprised us to see gold remaining in consolidation mode but it seems the market has other thoughts, at least for the time being.
Developments in the East have most certainly been cause for optimism. Singapore, a very wealthy and successful trading centre is dropping its 7% investment grade gold sales tax, the Shanghai Futures Exchange is lowering its margin requirements on gold futures contracts at the start of March and the Shanghai Gold Exchange is lowering its gold trading fees as a result.
Meanwhile the London Bullion Market reported a year on year gain of 15.3% in gold bullion transferred between members. Gold ETF bullion demand doubled in 2012 and the SPDR Gold Trust, the worlds largest, held its highest level of bullion since December 2011.
The Bearish Side Of The Gold Coin
A less bullish scenario is evidenced by a drop in the speculative net longs, the New York Comex bullish and bearish futures and options contracts, for the first time since the beginning of the year. 2012 may see India register its first fall gold imports since 2009.
Is Gold Targeting $1800 an oz Very Soon?
So there we have it, the immediate bullish factors out weigh the bearish while, unsettlingly those many fundamental issues, eventual hyperinflation, unemployment, housing market problems, oil, et al do not seem any closer to an acceptably painless solution.
As usual the market will have the last say but can it, no doubt with the help of government and central bank manipulators, keep gold breaking out to its first target of $1800 an oz.