Long Gold
Gold continues to rise. The fundamentals are driving gold: weak dollar and inflation concerns. Saw a report by Standard Bank expecting prices to rise another 8% this year. I see gold at $1,100 with the combination of solid fundamentals, Barrick gold unwinding its hedges and technicals that will continue to drive gold up.
Although gold looks like it is at a high price when comparing in dollars, gold remains well below last year’s high when priced in pounds, euros, yen or Swiss francs. September is typically the best month for gold and having now crossed the $1,000 barrier again, it could gain momentum from increased exposure and mind-space for investors. Interesting article in today’s WSJ as well saying the price of gold has traditionally been equivalent to that of one high-quality men’s suit. Maybe a little silly, but worth a re
Buying gold on every pullback. Up today for the first time in four days. Still expect the dollar to be weak and investors to seek safety in the typical store of value: GOLD. Taking a look at the ETFs, gold is at or within a percent of the record high holding amount. In spite of the IMF’s approved sale of 403.3 metric tons (value of $13 billion) just the other day, gold price remains strong. In spite of the 38% decrease in gold consumption in India, gold price remains strong. Long gold. Buying on every pullback
A lower dollar is generating further interest in gold. The dollar declined against 13 of 16 major currencies yesterday. Barclays Capital forecast gold may continue to make new highs stating, “We maintain a bullish bias for gold, expecting a test and break of the all-time high with potential for higher levels still into year-end.”
I tend to agree with this analyst quote, “The dollar and risk sentiment will continue to lead gold in the coming sessions well placed to set fresh highs.” Another analyst said, “Gold remains well supported. The support is even more noteworthy given crude oil’s slide yesterday.” Investor interest remains strong as ETFs continue to receive strong inflows of money. Additional tailwinds to price of gold: Pictet & Cie, Switzerland’s largest private bank, will start a fund backed by physical gold next month in an attempt to help its investors protect against infl
The strengthening dollar is cutting into demand for gold as the dollar reached a two week high against the euro. The correlation between gold and dollars has been very high as of late and will probably continue to follow the movements in the euro-dollar. In spite of recent dollar strength, I still see gold going to $1,100.
Flat today the Gold
+0.09%
Point of concern for gold from a demand point of view: Indian imports, the world’s biggest buyer, probably fell for the fifth month in a row during September as the price of gold is keeping jewelers from buying. India has imported less since April and imports last month were 21.8 tons compared with 98 tons a year earlier. In spite of this, I don’t believe gold is trading based on supply / demand, but more technicals and fear.
The soft dollar will continue to support gold prices and will be the driving force for further increases in gold. In the event there is an improving economy, then inflation concerns should drive investors into gold. In the event the economy takes a turn for the worse, then a flight to safety and a risk-free commodity will drive investors into gold. Gold is headed for its biggest three month gain in 6 quarters, so I would expect a consolidation period prior to another extended breakout. I am still long gold at these prices.
Friday’s weekly CFTC update
Speculative long positions outnumbered short positions by 231,386 contracts, down 5,363.
Miners, producers, jewelers and other commercial users were net short 275,234, down 12,376 contracts.
No huge change, so I interpret it to reflect no change in the expectation of the price of gold.
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I continue to be long gold as investors move out of the dollar and need another store of value. Also, Barrick Gold, the world’s largest gold producer is buying gold meaning there is increased demand. Barrick last week said that it is eliminating its hedging program and since the end of June had converted 2.4 million ounces of fixed price contracts to floating contracts, meaning that it purchased that amount of gold in the market. It still has 3 million ounces of fixed contracts to unwind and in order to fund the purchases announced a $3.5 billion equity offering. AngloGold Ashanti had also previously announced its intention to eliminate its hedge book of 4.1 million ounces by year end. I see major tail winds to the price of gold.