Not Just Inflation Fears Boosting Gold
Source: MarketWatch, Peter Brimelow (11/8/10)
"Buyers are in control of gold; it is that simple."
The metal's friends must be wondering if it gets any better. The CME December gold contract rose $50.10 (2.95%) last week to close at a record high of $1,397.70. Silver, which many old precious-metals hands consider to be a purer reflection of U.S. speculative sentiment, was up even more.
What's more, gold expressed in euros managed to get above the early September high. Gold expressed in U.S. dollars had risen substantially since then, and gold bears were pointing at the lack of progress in gold in other major currencies as evidence that the move was vulnerable. That argument has now failed.
Even the long-sluggish gold shares behaved. The ARCA Gold Bugs (HUI) managed (at last!) to get above the 2008 high, achieved when gold was first briefly over $1,000; it managed a 5.3% appreciation for the week. It closed at an all-time high.
Dow Theory Letters' Richard Russell points out that the gold major-share Market Vectors Gold Miners ETF is now being outpaced by the junior-share vehicle Market Vectors Junior Gold Miners ETF.
Russell says this "indicates speculative interest is rising."
Still, sentiment indicators don't rule out gold going further. The HGNSI Index did rise during the week to 55.3%, and MarketVane's Bullish Consensus for gold added is at 79%. The LeMetropoleCafe website reports that the MV Bullish Consensus "spent 12 days in the 80s in October, peaking at 85% on Oct. 14." So current levels are not necessarily vulnerable.
Plus, it's not as if gold hasn't tried to correct. It plunged over $30 on Wednesday, before recovering, and there was another frustrated breakdown on Friday.
As JSMineset's Trader Dan remarked after Friday's close: "Buyers are in control of gold; it is that simple."