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Gold prices moving again

Tuesday, March 09, 2010 by Metals Place

Gold bugs argue that even extreme dollar-centric investors should take notice, because of the possibility of momentum buying from European traders influencing U.S. dollar pricing. Could the foreigners know something?

This development is something of a triumph for gold's friendliest sceptic, Dennis Gartman's The Gartman Letter, which re-established sizable positions in gold, hedged by currencies – in effect, euro gold, sterling gold, etc. – a couple of weeks ago.

Gold in U.S. dollars peaked Wednesday at the second-highest close this year, but then moved basically sideways. This did have the effect of turning the Australian service The Privateer's U.S. dollar 5X3 famous free Point and Figure chart distinctly bullish.

Gold shares did rather well, closing the week at highs. The Nyse Arca Gold Bugs gained 6.1% on the week, and the PHLX Gold/Silver Index rose 5.8%, although gold only picked up 1.5%, closing at $1134.40.

Many services credit gold shares with gold market insight.

JSMineset's Dan Norcini wrote: "The ability of gold to generate buying ABOVE the $1,130 level is a technical plus. It is also trading above all the major moving averages, which plants the market firmly on a bullish footing."

Generally, a number of attentive gold observers were quick to see gold's action as significant. Harry Schultz said early in the week in his Gold Charts R US newsletter: "Cheery gold action this week, with bullion developing a crucial higher reaction low and high above top support of its December bull wedge, with a $1,229.00 upside measured target ... the gold market is revving up."

On Wednesday evening, the Aden Report announced: "Gold and the precious metals bounced up further this week from their Feb. 5 lows, closing at a seven-week high today. ... It looks like the D decline may be over, but it's still too soon to tell. ... The longer gold stays above $1,117, the more likely the lows are behind us."

In the Aden Report's wave pattern work, the end of the "D decline" downswing might well mean new record highs.

What is happening? From very high up on the gold-world intellectual food chain, The Privateer's semi-monthly essay this weekend takes the view that a generalized slide in confidence in government debt instruments, and in the agencies that rate them, is underway.

"For U.S. investors, the financial condition of California is much more risky than the financial condition of Greece. And the latest attack by the U.S. ratings agencies is the decision by Moody's on March 4 to downgrade Deutsche Bank in Germany because of a 'lack of transparency regarding the bank's capital market activities.'"

"How pathetic is that, given the Fed's continuing refusal to come clean on their U.S. bank bailout activities?"

Privateer suggests this weekend's Icelandic referendum rejecting bank bailout terms may be catalytic: "A very small nation has awakened to the fact that government guarantees can only be made good by the governed. This is a small crack in a very big iceberg."

Contrary opinion seems favourable. The Hulbert Gold Newsletter Sentiment indicator is unchanged from Mark Hulbert's March 2 column at 46.6%. But gold closed Friday almost $20 higher. MarketVane's Bullish Consensus for gold at 77% on Friday compares constructively to early February's multi-month low of 70%.

Metals Place

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