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First with Financial Comment from Arabia

Gold price correction good news for much higher prices

with 5 comments

The pull-back in gold prices from $1,226 an ounce in December is alway liable to be interpreted as the end of the road for gold. If you look at the monthly graph this does look a bit like a spike:

But look again at the chart for the decade, and it is very clear that no price spike has actually occured:

Indeed, the pull-back since December is a good thing as it keeps the long-term uptrend in tact. Prices are simply going to go higher and follow the momentum upwards. Trends of this type are very powerful in financial markets.

A sudden upward shift towards a parabolic shape would indeed indicate that gold prices are reaching a peak. But no sign of it yet. When will that happen? Jim Sinclair has his $1 million bet open for the gold price to be $1,650 in a year’s time, but that would only be the start of a truly parabolic price uptrend.

Graphs courtesy of http://www.preciousmetalswarrants.com.

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Written by Peter Cooper

February 4, 2010 at 10:55 am

5 Responses

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  1. Heres a link to an article that speculates on the possible divergence between paper gold and physical :

    http://seekingalpha.com/article/187088-how-will-gold-corruption-affect-gold-price

    Fantastic website by the way.

    Weathers

    February 7, 2010 at 10:24 pm

  2. Here’s an Interesting Update:

    The savvy folks on Wall St. know that JPM has the largest short positions in gold and silver on the COMEX. They also know that JPM has been aggressively shorting gold and silver over the past 6 weeks.

    During the past week, after JPM had entered their massive shorts in gold and silver, their actions had driven out the tech “longs” in gold and silver investments (i.e. automated SELL STOPS were executed).

    Immediately after the tech longs executed their massive liquidations, JPM was there to BUY LONG, every time the tech longs liquidated. In brief, this means that JPM is trying very hard to “get out of their short positions.

    Mining Stocks Rise Sharply:
    Notice that on Friday, 5 Feb, the gold and silver mining stocks jumped over 5%. The Hedge Funds certainly know the tricks that JPM et al are playing, and they “want in” on this game, too.

    Bottom Line:
    Look for gold and silver to consolidate over the next week or so, and then begin their inevitable climb again.

    obewon

    February 6, 2010 at 8:23 pm

  3. WOW! Gold down $48 IN ONE DAY. Dollar up. It will be the reserve currency for a long time yet. Think how long the British pound lasted as the top dog.

    Bill Simpson in Slidell

    February 5, 2010 at 1:11 am

  4. Great commentary, Peter!

    Gold is getting down to the “buy point”, according to Jim Rogers. Silver has been at the “buy point” for quite a long time, but with JPM continuing to short silver aggressively (they have to force the pension funds and mutual funds to execute their sell stops, so they can reduce their grotesque 300 million oz. short position!), silver is a steal!

    Time to load up on silver. It’s likely to be 50% higher by the end of 2010.

    obewon

    February 4, 2010 at 8:39 pm

  5. Quick question – current chart on this article looks like a descending triangle – bearish or at least correctivee back down to $950ish in outlook ? Current rumours about availability of gold for delivery are rife (talking bout the difference between physcial versus paper gold). So question is can paper price for gold crash when people realise that they can’t actually take delivery of their gold?

    Weathers, interested amateur.

    Ed note: a squeeze in supply for both paper and physical has the same effect.

    Weathers

    February 4, 2010 at 5:42 pm


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