Gold

Source:

"In my view, a three-digit gold price is history."

Gold has won another battle in its decade-long bull market by finally breaking through resistance at $1,010–$1,012, as we can see on the following chart.



Gold's short- and long-term uptrends have now been reconfirmed. The $1,010–$1,012 area should now act as support, but I doubt if we will see those levels. I don't expect much of a pullback here. Two things are happening.
  1. A lot of money is on the sidelines looking to participate in gold's breakout and to find a safe home. Consequently, I expect any pullbacks to be well bid.

  2. There is a scramble for physical metal (a point I made in a 10/9 interview on CNBC Europe).
In the interview, I mention Greenlight Capital—a large hedge fund that switched in this year's second quarter out of GLD into physical metal. I believe this switch marks a tipping point from which we will see gold climb much higher. People are increasingly seeking physical gold, which is a bullish development.

GLD has less gold now than it did in June (1109 tons today vs. ~1132 tons in June). Since June, the price has risen more than $100, proving that gold does not have to flow into GLD for the gold price to rise.

Given the large short position that exists in gold, the price can rise even if GLD contracts in size. Assuming the gold reportedly backing GLD really exists and isn't double counted or encumbered in any way, in a contracting GLD the short-sellers will increasingly be forced to cover so their short position does not become too large a percentage of GLD's total assets.

The implications for the gold market from the trading action this past week are very bullish. Breaking above $1,000 is a major event. It is a worldwide wake-up call that the global monetary problems arising from mismanaged fiat currencies are worsening.

In my view, a three-digit gold price is history.

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