Gold Bears Gathering, but Gold Bulls Defiant


"We have what economists love to call a 'paradigm shift' in the US$ gold price. . ."

Last week saw the highest U.S.-dollar gold price ever, just over $1,070, and the highest London P.M. fix ($1,059.50). Yet by week's end, gold was $13.50 off its peak—less than $3 up on the week. Many voices were to be heard predicting an important—possibly short-term—decline.

The bears cite a variety of technical indicators. The bulls deploy sweeping fundamental arguments, often very impressively. (See 10/08 column)

Is there a pothole ahead?

A lot of experts have suddenly emerged on India, by far the world's biggest gold importer. Specifically, they predict a big fall-off in Indian buying, now that the great Diwali Festival—which occurred on Saturday—is over.

To this, Bill Murphy's LeMetropoleCafe, which can lay claim to having pioneered using India as a guide to the gold market, simply reports that the country has been a steady buyer of world gold in the past few days, based on the local price premiums.

Gold bears are very pleased by the speculator position revealed in late Friday's data from the Commodity Futures Trading Commission. The website news flashed in hushed tones: "COTS data for the week of October 13th shows speculative longs in all-four metals increased—AU up 2M ozs to a record 32.46M ozs."

But gold bulls respond by pointing to sentiment indicators. The Hulbert Gold Newsletter Sentiment Indicator (HGNSI) has been stuck at 53.8% since Oct. 7. It has been as high as 89.58%. This lack of movement from the lower level is not consistent with a blow-off.

The Privateer asserts: "We have what economists love to call a 'paradigm shift' in the US$ gold price. . .There is a HUGE difference between a three-figure U.S. gold price and a four-figure one. Now that gold looks to have consolidated ABOVE US$1,000, the future of the USD has become the number one item of global financial and economic analysis."

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