Wed 18 Feb 2009
Gold has been steadily climbing the last few weeks. Some fundamental reasons for its climb has been growing concerns over inflation, growing concerns over deflation, concerns on the the ability for the Euro to act as a reserve currency, and concerns over possible US bank failures.
The weekly chart, posted below looks very good. It has formed a massive bull flag over the last year or so, which is good news for the bulls. I think fundamentally gold is strong. Gold in terms of US dollars has actually been lagging all over currencies. Gold has broken to new highs against almost every other currency in the world.
Some points of interest to me are not just the $1030 high, but also the $990, where it failed last Summer. On pullbacks I would expect gold to hold above $930 to prove real strength, and $890 a little lower, although I would prefer it not violate the higher level.
One interesting point to note: large gold miners such as ABX, AEM, GG, and NEM have not followed the commodity into this last upmove to the 980 level. This could be telling us that a meaningful pullback could be in store for gold futures. Nonetheless I will be looking to buy into weakness instead of shorting into strength. We could be witnessing the beginning of a multi-year bull run.