Continued calls for higher metals’ are common among analysts. As we already discussed, we need to keep our heads when it comes to these speculations. Are they based on a sound understanding of the current market, what experts think should happen or simply wishful thinking?
We find another analyst pointing out that the recent spike means we’re going higher. In fact, Bloomberg reported last week that their survey revealed investors are the “most bullish in nine months.” Apparently 29 of the 35 experts polled are bullish.
Much of the challenge is discerning what time frame analysts are examining. For instance, here’s a great chart that shows the oscillator index in the oversold territory. Notice that it’s a daily chart, and ends August 12. Because it’s a daily chart and in the “buy” territory, day traders might make a quick buck off this. That’s hardly a buy signal on August 28th.
Recent upward movement is indeed encouraging. In fact, we view it as indicative of the long-term expectations for gold. But “long-term” is a perspective involving years, not days or even months. And, while we still anticipate that gold could reach $2000 before year’s end, we also anticipate the very real possibility that, though we might reach $1700 this month, following prices could drop to $1600, or even as low $1500, between now and 2013.
Volatility is high this year as we approach elections. Current highs in many assets seem to indicate we need a correction, or at least a consolidation. The timing seems like it would be perfect, just before elections. We’ll keep our eye on this and do all we can to keep readers informed.
With this in mind, don’t expect anything significant from Jackson Hole. I know many are calling for QE. Frankly, it just doesn’t make sense. Markets aren’t bad enough right now to merit it. And with high expectations of QE among many, it’s very possible that any positive effect is already priced in. Even if we get a significant drop tomorrow, QE likely won’t happen for another month as we near elections.
Regardless of what happens to gold in the next month, however, rest assured that we’re long both gold and silver, and will remain so. Furthermore, there’s a core position in precious metals that we don’t ever intend to sell, based on the safety net and security they provide.
For your prosperity,
J. Keith Johnson
The Gold Informant