Gold Markets Still Strong despite Economic Downturn
We’re seeing a very powerful rally, from gold testing lows of around $905 a few days ago, to now where we’re pushing the $940 level. Following this brief excursion to the upper end of that range, we’re probably going to come back down in the next couple weeks to test the bottom of that range, and potentially break through it briefly into the $890s.
That’s because, at the moment, Gold Investment is being buoyed by a rebound in economic optimism. People are looking to sell gold. You’ve seen stock markets picking up, and we’ve got oil back above $60 per barrel. But I think those factors are likely to reverse in the next couple of months.
Personally, I’m not convinced there’s much real recovery in the economy. I think there’s been a fair amount of spin and selective interpretation of data, and the real situation remains pretty dire.
Also, we have a large long position on the Comex Gold Futures market, which I think is overhanging the market to some extent, and that will probably reduce in size. These things tend to go in cycles. So I think we’re going to see a cycle of length reduction: growth in short selling on the futures market, and a long liquidation phase. That’s going to also help us get temporarily at least below $900, or at least test that level very seriously.
So the most likely thing now, I think, is that we’ll see gold in the short term move lower over the rest of the summer, which will then set us up for an autumn rally to see us move considerably higher. But we shouldn’t lose sight of the big picture, which is that we’re seeing a ratcheting up of the floor in gold.
I mean, yes, I’m saying gold will test $900, but I do still feel this market is moving higher, and we’ll break out of this $900-$950 range we’ve had for awhile. I just don’t see why it should happen quite yet.
