Gold: You Just Can't Keep a Good Market Down

Andy Hecht (June 6, 2011)

The Top Gold Stock of 2012

Commodity prices have been drifting lower over the past month or so — that is, most commodity prices.

Very quietly, the gold market has been showing incredible strength. In fact, gold prices traded up t0 $1,555 per ounce today on the August futures contract. That is a mere $23 dollars below the all-time high for the yellow metal made on May 2^nd of this year.

There have been reports that George Soros has sold the majority of his gold holdings. Has this affected the price of gold in any significant manner? The answer is, not yet. The CME (possibly under pressure from Washington) raised margins on gold futures last month. Has this affected the strength of the yellow metals? Again, not yet.

It turns out that gold continues to perform like the global reserve asset that it has become. Let’s take a look at this short-term daily chart of gold’s performance over the past few months:

The gold market has continued to grind higher in the face of high profile profit-taking and exchange and governmental intervention in the futures market. Although gold looks a bit overbought on the stochastics, the level of historical volatility is very low. Gold continues to be more stable than the Swiss Franc (with a daily historical volatility of 9.72%), the Euro (with a daily historical volatility of 9.22%) and the Yen (with a daily historical volatility of 8.25%)! In fact, gold is one of the most stable currencies in the world.

Gold stocks or the prices for gold mining equities have come lower with the rest of the commodity sector over the past weeks. My colleagues Eric Roseman has cited this turn of events in Commodity Trend Alert for paid-up subscribers. So in an environment where every commodity is retracing, where gold equities are lower, where investors like Soros are selling gold and where the exchange and U.S. government and regulators are doing everything they can to stifle the gold rally, gold prices continue to hold and move higher. At last glance gold is up about $3 today and is trading just shy of the $1,550 level.

Gold is going to make a new high soon. Gold prices are going higher in the future. The bottom line is that faith in paper currencies has eroded. Problems with southern European economies continue unabated. The U.S. deficit, the U.S. dollar and the U.S. debt ceiling are all contributing to the fact that gold is money and gold is in demand.

You can’t keep a good market down, no matter how hard you try. At the end of the day the fundamentals will win out. The fundamentals for gold are as good as gold.

Happy trade hunting….

Gold: You Just Can't Keep a Good Market Down

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