The recent pull back in gold has presented a short term buying opportunity. All the catalysts for a bull market in gold continue to remain intact. The drawdown in bullion price started early Friday after the release of a better than expected jobs report that drove the dollar higher and sent gold investors fleeing for the exit. Selling continued until mid day Monday after Federal Reserve Chairman Ben Bernanke mentioned that the US Economy, though improved, still remained weak, and may have to deal with a elevated unemployment rate for quite some time. The price action then showed some stability from dip buyers and investors closing short positions, to close down for the day, but well off its intraday lows.
From our perspective, the recent dip in gold prices only reflects a buying opportunity because of these unchanged fundamental reasons:
1. The monetary picture for long term inflation has not changed.
2. The price changes in gold are affected by sentiment more than any other measure.
3. Interest rates continue to remain historically low.
4. Tensions in the Middle East continue to pose as a potential threat to financial markets.
Disclosure: Long DGP