Gold prices ended last week quietly however overall had a very strong week, leaving some experts to believe that gold can reach as high at $2,000 before year end.
By Peter Brimelow
Commentary: Gold bugs not worried by last week’s lackluster end
NEW YORK (MarketWatch) — Gold had a week for the history books but ended with a whimper. However, gold bugs remain confident.
Although the CME April gold contract (currently the benchmark “nearby” contract) had a record-high close on Wednesday of $1,438, and the London PM fix achieved a record level on Thursday of $1,447, both Thursday and Friday saw steep declines in the New York afternoon (after European markets had closed). So, for the week, April gold (GCJ11 1,422, -4.00, -0.28%) closed quietly with a gain only $10.10 (0.7%).
Naturally, the faction I call the “Radical Gold Bugs” — who believe that gold is constantly subject to covert, malign influence by the U.S. authorities and their chosen instruments — were neither whimpering nor quiet.
A correspondent on Bill Murphy’s LeMetropleCafe site snarled: “The Gold Cartel showed up for the second day in a row, late, and punished both gold and silver in a similar manner. … It will surprise no veteran Café member that gold was bombed the past two days going into an option expiry on Monday … same tricks (tactics) time and time again.”
(It is a fact that CME gold-option expiries seem to attract heavy selling pressure.)
Dan Norcini at his new Trader Dan’s Market Views website had a reasoned analysis of Friday: “…the U.S. dollar’s technical-chart picture is horrendous. It had broken through a critical support level near 77 on the USDX (DXY 76.10, -0.12, -0.16%) last week and had further descended down towards the tremendously important 75 level. … The ugly truth is that the dollar was on course for a major crisis if it violated the 75 level.”
“Enter the Fed officials today and yesterday. Apparently the strategy was to get several of the FOMC governors to hit the airwaves talking about ending the QE program. … Result? Up goes the dollar and down goes the precious metals market. Coincidence? I hardly think so.”
The specter of a determined official-sector effort to cap the gold price is alarming for the gold bulls — especially as a credible rumor of it is likely to attract opportunistic profit-motivated sellers and be self-fulfilling.
But this time the fear may be overblown.
For one thing, gold shares are optimistic. The ARCA Gold Bugs Index (HUI 564.92, -0.67, -0.12%) managed to gain 5.45% last week, six times gold’s rise. And while gold shares generally are still below their highs of early December, the HUI does appear to have broken its downtrend since then. Gold bugs believe that the shares do sometimes display predictive powers.
For another thing, physical-market premiums as tracked on Le Metropole Café have improved lately. Partly this stems from the U.S. dollar decline, and partly from the recent start of a rally in emerging-market equities. This is firming up such currencies as the Indian rupee, and consequently strengthening their bid to the global gold market.
Consequently, the assessment posted Friday on the Jesse’s Café Americain website deserves attention: “I do not know what it is going to take to move gold over that neckline in the big inverse head and shoulders formation, or how long it might take. But I suspect strongly that when it does break out, we will see another fast move higher, because so many in the markets are not positioned for it. After at least one serious ‘gut check’ on the longs, gold will most likely move fairly quickly to $1,590.”
“Depending on what happens, I will not be surprised to see gold hitting $2,000 by year end.”
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