Gold at $2,000 by Year's End?
Source: MarketWatch, Peter Brimelow (3/27/11)
"Gold ended with a whimper last week, but gold bugs remain confident."
Gold had a week for the history books but ended with a whimper. However, gold bugs remain confident.
Both Thursday and Friday saw steep declines in the New York afternoon (after European markets had closed). Naturally, the faction I call the "Radical Gold Bugs"—who believe that gold is constantly subject to covert, malign influence by the U.S. authorities and their chosen instruments—were neither whimpering nor quiet.
The specter of a determined official-sector effort to cap the gold price is alarming for the gold bulls—especially as a credible rumor of it is likely to attract opportunistic profit-motivated sellers and be self-fulfilling.
But this time the fear may be overblown.
For one thing, gold shares are optimistic. The ARCA Gold Bugs Index managed to gain 5.45% last week, six times gold's rise. And while gold shares generally are still below their highs of early December, the HUI does appear to have broken its downtrend since then. Gold bugs believe that the shares do sometimes display predictive powers.
For another thing, physical-market premiums as tracked on Le Metropole Café have improved lately. Partly this stems from the U.S. dollar decline, and partly from the recent start of a rally in emerging-market equities. This is firming up such currencies as the Indian rupee, and consequently strengthening their bid to the global gold market.
Consequently, the assessment posted Friday on the Jesse's Café Américain website deserves attention: "I do not know what it is going to take to move gold over that neckline in the big inverse head and shoulders formation, or how long it might take. But I suspect strongly that when it does break out, we will see another fast move higher, because so many in the markets are not positioned for it. After at least one serious 'gut check' on the longs, gold will most likely move fairly quickly to $1,590."
"Depending on what happens, I will not be surprised to see gold hitting $2,000 by year-end."