|
 |
|
|
|
Gold Closes the Gapby Peter A. Grant
Oct 17, AM 
Gold extended Tuesday's gains in overseas trading to close the small gap left on Monday at $1749.15/$1752.18. However, a more important Fibonacci level at $1756.61 must be negated to ease short-term pressure on the downside. This level marks 38.2% retracement of the decline from $1795.90 (05-Oct high) to $1732.32 (15-Oct low).While gold did succeed in setting new highs for the year early in the month, the failure to take out chart resistance at $1802.89 (08-Nov-11) leaves the precious metal well contained within the range that has dominated since the latter part of last year. That range is defined by the all-time high at $1920.74 from 06-Sep-11 and the $1522.48 corrective low from 29-Dec-11. However, the long-term secular bull market remains underpinned by solid investment and sovereign demand. There are also some supply-side risks associated with the ongoing labor unrest in South Africa, the world's fifth largest producer of gold. Additionally, with both China and Russia accumulating gold as a reserve asset, most — if not all — of the mining output from the first and fourth largest gold producers is going right to their reserves. See more detailed analysis in our latest newsletter. The corrective tone that has recently emerged is attributable in part to rising global growth concerns, which I have covered in detail in recent DMRs and in the newsletter. Additionally, I think the narrowing of the Presidential polls is playing a role as well. Note that the recent high in the gold market came two-days after the Presidential debate in Denver, just as fresh polls reflecting Mitt Romney's performance were coming in. Mr. Romney has stated on a number of occasions that if he were to win the election in November, he would look to replace the Fed chairman, whose term ends in in January 2014. This, along with a shift in the likelihood that Mr. Romney might get the opportunity to sack Bernanke, has created a level of uncertainty in the market. However, I don't believe that a President Romney would appoint a true monetary hawk to the post, and in fact there are some in the Romney campaign that think Bernanke should be given a third term. Nonetheless, investors are understandably adjusting positions to account for the possibility of tighter monetary policy in a post-Bernanke Fed. Again, I wouldn't expect zero interest rate policy and other accommodations to be removed immediately if the Fed got a new chairman. More likely would be a gradual dialing-back of some of the super-accommodative policies that have emerged under Bernanke. Obviously, if monetary accommodations are to be scaled back, there needs to be a reasonable expectation that Congress will do what is necessary on the fiscal side of the equation, lest the U.S. economy fall back into recession. Even Ben Bernanke does not believe monetary policy is the answer to all our problems. A point that he reiterated just this past weekend in Tokyo, when he said, "monetary policy is not a panacea." Interestingly, both gold and equities recently returned to levels last seen in mid-September, when QE3 was announced. That drives home the point pretty effectively as well. Peter Grant is USAGOLD's resident economist and a well-known analyst globally in the forex and precious metals markets. NEWSLETTER SIGN-UP Opinions expressed in commentary on the USAGOLD.com website do not constitute an offer to buy or sell, or the solicitation of an offer to buy or sell any precious metals product, nor should they be viewed in any way as investment advice or advice to buy, sell or hold. USAGOLD, Inc. recommends the purchase of physical precious metals for asset preservation purposes, not speculation. Utilization of these opinions for speculative purposes is neither suggested nor advised. Commentary is strictly for educational purposes, and as such USAGOLD does not warrant or guarantee the accuracy, timeliness or completeness of the information found here.
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Wednesday October 17
website support: sitemaster@usagold.com
Site Map - Privacy - Disclaimer
The USAGOLD logo and stylized gold coin pile are trademarks of
Michael J. Kosares.
© 1997-2012 Michael J. Kosares / USAGOLD All Rights Reserved
(from USAGOLD.com) --
