** GOLD AT SUPPORT **
Gold is currently flirting with its 200-day moving average. Further the metal seems to be testing the lower end of its long term upward sloping trend line. Should gold be able to find a bottom anywhere between $580-$590, we think it will prove to be an excellent buying opportunity. From a longer term perspective gold seems to be moving within a symmetrical triangle pattern, which generally displays a pause within the long-term trend.
With commodities in general and precious metals in specific now making headlines in a negative sense (remember how different that was only a couple of months back?) we are definetely inclined to start thinking contrarian. The long-term fundamentals behind the gold bull market haven’t changed in our view (see our February post for more on the fundamentals).
What will trigger the bounce? Oh, more chaos coming out of Iran, a not-so-orderly decline of the U.S. dollar, a continuation of global loose monetary policy or just ordinary short-covering. Pick whichever one you like. What the risk is? Another round of global anti-inflation talk (AND action) coming out of the G10 or sudden out of the blue institutional sponsorship for what Steven Roach has to say.
No Guts No Glory. We’re piling into gold around $585. Stops below $575. Target for the bounce $620+.
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