Will Gold Revisit Highs This Week?

With gold closing at $957 and silver $14.70 an ounce last week there was cause for celebration among precious metal investors.

Traders are pointing to overbought signals and cautioning that the market could pull back. But a peak price on Friday of $961 left gold just a tantalizing $39 below the $1,000 barrier.

Market gurus like Jim Sinclair have noted that these round numbers are always a big issue in markets, and he says gold will make it past and stay past $1,000 on its third attempt – that is where we sit today.

Chart views

Besides a glance at the gold chart indicates that the precious metal is not so much getting ahead of itself – that would come at $1,200-1,300 an ounce- it is merely back on trend in this bull market.

So much for the technicals, the fundamentals could scarcely be better. The fear of inflation and dollar devaluation is driving this rise in price, and the sudden slump in the value of the US dollar last week is the immediate cause of this price spike.

With the upcoming and seemingly unavoidable bankruptcy of General Motors on the horizon next week or the following week markets are likely to weaken. Equities are due to correct from their stunning bear market rally. That might or might not rally the dollar – depending on its steepness.

But last week we saw equities falling and the US dollar and bonds. The only show in town was precious metals. Could this be a new pattern?

Gold traders are looking back to past performance and the usual soft summer patch for prices. But we have been through a global financial crisis, which is still ongoing, since last summer and this pattern may have changed as a consequence.

There is certainly a good argument for selling equities – because the recovery is a long way off and mainly a fiction of lurid imaginations – and also avoiding US treasuries – because of the risk of devaluation.

Safe haven

Gold and perhaps even more silver offer protection against these factors, and as investors around the world cotton on to what is happening the tight supply in both these markets promises a price explosion to the upside.

Under Elliott Wave theory the price of gold could rise quickly to $2,500 an ounce with silver surging past $100, and that is another excellent reason to pile into precious metals before the rest of the herd.

Comments

[yellowhoard:]

Hold gold to protect your wealth.

Buy silver to make a lot of money over the next three years.

The train is leaving the station.

May 24 08:39 AM

[DONE_SONZ:]

"So much for the technicals, the fundamentals could scarcely be better".Fundamentals will outshine the crybaby pullbacks.

May 24 09:08 AM

[sandspider:]

Yes I have to agree. There are a couple other items that could be said along with the previous. The UAE is asking for their gold to be physically removed from the UK banks and returned to the UAE. Rumor has it that Germany likewise has requested their gold stored in the US be returned to Germany. These are demands for the physical metal to be returned not just a piece of paper. What does this say to everyone else? The Middle East search for a COMEX of their own and an attempt to form a united ME currancy. China using their US treasuries as security to purchase small commodity companies and hard goods thru out the world. It seems that others are smelling smoke, so what will be the result? 230 plus years to go into debt a trillion $ and 8 months to go into debt another 2 to 12 trillion $ so what will be the result of that? All those trillions are not just going to up and disappear much like their appearance out of thin air. Do I see even more burdensome taxes? More theft by the professional thieves! Jeg I do and I will continue to hold material of real value; gold, silver, energy and food.

May 24 09:14 AM

[Mad Hedge F...:]

It's withing breating room now. The prospective US rating cut is also cutting the legs out from the US dollar, which is hitting fresh 2009 lows against everything. It turns out that if the world is not going to zero, you don’t need a safe haven like the dollar any more. And safe havens with a zero yield were not that great anyway. The New Zealand dollar has rocketed 30%, and the Euro has gapped through to a new yearly of $1.40. A lower dollar is one of the few certainties of life. The only question is how far, how fast. This further underlines my arguments to buy emerging markets and commodity producing countries.

May 24 10:16 AM

[widestrides:]

I like silver and mining companies, but am afraid both will go down with the market just like they did the last time. So gold may be the safer bet.

Why would you expect silver and precious metals mining stocks to go up this time when the market crashes or retests the March lows?

May 24 12:08 PM

[Donald Ingram:]

Decoupling is proceeding without much notice of the American public. The US dollar has lost value against a host of other currencies recently, eg: Canadian, New Zealand and Australian - all gaining over 10%! The rest of the world is not as bad off as is the States. In the words of Peter Shiff, "we are not the engine. We are the caboose, and we are being cut loose".

Hence the flight to safety in gold and silver, not only from around the world but from inside the US also. Silver is a VERY good play right now because it's 100 times more scarce than gold. As further contraction in the market takes place, the more wealth will be transferred to gold, silver and precious metals mining stock. These will stay strong as long as the markets stay weak.

On May 24 12:08 PM widestrides wrote:

> I like silver and mining companies, but am afraid both will go down
> with the market just like they did the last time. So gold may be
> the safer bet.
>
> Why would you expect silver and precious metals mining stocks to
> go up this time when the market crashes or retests the March lows?

May 24 01:31 PM

[AuGod!:]

Gold bullion as a risk management tool is always a good bet. As an investment, it can and should glitter in the long term. But preceding that move, short term, there could be a pull-back to 900 or slightly below or even lower. So if you want to buy the metal, do you buy now or wait for the pull-back? Charts and fundamentals are useful but often make conflicting claims or may be interpreted from differing perspectives. Gold and silver stocks can quickly go south with the paper markets. Gold bullion can drop like a stone if folks need to sell in order to cover their losses elsewhere. If one is seeking a numeraire, namely,
"The unit in which prices are measured. This may be a currency, but in real models, such as most trade models, the numeraire is usually one of the goods, whose price is then set at one. The numeraire can also be defined implicitly by, for example, the requirement that prices sum to some constant."
... then gold metal may not be the best choice. My humble conclusion is that, as has been said elsewhere, "the real risk is being out of gold bullion". If one is thinking about taking an initial position, paying more for it today than you might in a month or so is no big deal if you can hold and still take advantage of further dips going forward, certain that the long-term will see 4 figure gold. If you are looking for a fast buck then it may not be wise to do so. I am just a working stiff but will continue to increase my position gradually, say a few ten ounce bars and some coin now and again in August-September and see what happens. I don't think our financial system is going to the dogs entirely so I will forego the bunker and tins of spam. In every jurisdiction, gold is very liquid and has value in local currencies some of which are gaining strength against the US$. So, if those local currencies gain further against the US$, the relative price of spot gold, as marked to that US$, will likely drop. If the US$ advances, then your gold bullion will be worth all the more in one of those currencies. Is there US$2000 gold on the horizon? No, in my view, not soon but when US banks find a way to flush more loans into the system and not hoard funds to support their balance sheets, increased consumer and corporate spending will likely face price inflation - the ultimate wages of a debased currency. Will it be Weimar Republic or Zimbabwe - no in my opinion, but it will be substantial. Can the deflationary forces be tamed and timed to counter inflation? Yes but timing is critical and there could be a year maybe more of misery due to indecision and/or incompetence and/or methodoligical blunder. Remember the old joke about the three econometricians out on a hunting trip? A deer meanders into range and the first econometrician steps up, takes careful aim and misses ten feet to the left. The second econometrician steps up, also takes dead aim and misses the deer ten feet to the right. The third econometrician steps up and doesn't aim or shoot just throws his hands up in the air and gleefully shouts "WE GOT IT!" What are the chances of our governments executing a one-shot-heart-shot? Have a nice day and evening and get some rest. You look tired! jk

May 24 02:54 PM

[highlarche:]

Go where the money is in surplus. China. Brazil. Gold and Silver as well as energy outside the U.S. . I remember Jimmy Carter putting price caps on energy.

May 24 03:19 PM

[sapd:]

I heard that since 1979-I owned SA gold stocks then-BEWARE-in 1982 gold fell $200 in one day-world gov't 's can conspire to "FIX" anything-especially precious metals. Make sure you got plenty of "LEAD" too-you will need it to keep your gold-


On May 24 08:39 AM yellowhoard wrote:

> Hold gold to protect your wealth.
>
> Buy silver to make a lot of money over the next three years.
>
> The train is leaving the station.

May 24 04:27 PM

[chux08:]

If it goes up, I'm selling more. If it goes down, I'll turn into a buyer. It's that simple.....

May 25 01:33 AM

[secmaven:]

PAAS is moving 2:1 with the price of silver in this market.

May 25 01:51 AM

[one eye:]

chux08: at some point, you will wind up being unable to buy the same amount for less because you will have sold too early and the move down ends higher than you sold.

It will turn into a case of higher Highs and Higher Lows.

May 25 02:09 AM

[Spartacuss:]

Perhaps a little aside here in the issue of paper versus actual in the metals. My son-in-law not too long ago hit me up on the Perth certificates wanting to know more and who to buy from and then supplying him with all info he opts to buy physical instead.

So, in this conundrum which many people get anxious about I advise to hold both metals in bullion coinage but to only put a fraction of your metal position in physical, the amount needs to be tempered by what you would need in case of meltdown, totally, of the dollar and the physical metals would then resort to currency of a form. How this would work in actual practice I don't know, however, being without is not a good option either.

Physical has it's own problems such as storage and then the big bug-a-boo, government confiscation. I tend to doubt it as most people in the US hold very little and a good portion of that is numiscatic. That said, for larger investment purposes, offshore attracts mightily and the Perth program is insured and backed up by the Aussie government whatever that should ultimately mean.

The ETF's seem to be a good way to go too but then I am loathe to do anything with the metals that include the US, so I opted for the Perth program despite delivery problems which I do not want anyway. Ultimately I can sell my certificates outside the US denominated in Aussies or whatever and then if US dollars, they would be exchanged out instantly.

Insofar as this article is concerned try to remember that according to sources only .6 percent of annual gold production goes to investors...at least so far. This is the strongest argument for gold of all because as the dollar tanks and the treasuries tank we are going to have a gold rush, a very big gold rush.

May 25 06:43 PM

[Peter Cooper:]

Please have a look at this article for my thoughts on how gold and silver stocks will perform now:
arabianmoney.net/2009/.../

May 27 10:18 AM

[Peter Cooper:]

And yes the Perth Mint is a very good solution to storage and security.

May 27 10:19 AM