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Peter Brimelow: Is gold ready for a 'rocket shot'?
By Peter Brimelow
Monday, January 28, 2008
NEW YORK -- Gold, like every other asset market, turned in a terrifyingly volatile performance last week. But it managed to close up more than 3%, at a new record high of $910.50. And the gold bugs are still confident.
The great $US 5x3 point and figure chart supplied to the public free by Australia's gold Web site The Privateer reversed a mid-week downturn and broke into new high ground:
On the basis of the past eight years, gold looks like going a lot higher.
This is very much the opinion of James Turk, a veteran gold bug, who in this weekend's issue of his Freemarket Gold&Money Report said: "Moves into new all-time high ground tend to be explosive, which describes gold's current position."
Turk then repeated his comment from the previous weekend's issue:
"In other words, anything can happen from here, including a rocket shot to $1,000 over the next few weeks, which I consider to be a very good probability. We already have lift-off. Get ready for the rocket shot":
Gold shares also finished up on the week: the Amex Gold Bugs Index (HUI) 2.3% and the Philadelphia Gold and Silver Index (XAU) by 2.6% -- but by less than gold itself, and failing to match the highs of the previous week.
This behavior troubles Pring.com's Martin Pring, who in his latest weekly report expressed the view that "any rally will be a risky proposition":
Pring, a disciplined long-term chartist, still holds to the view that gold shares have predictive powers over the gold price. Other bugs think this concept has to be questioned, considering the action over past couple of years.
For example, Dan Norcini, whose commentaries appear on Jim Sinclair's MineSet Web site, http://www.jsmineset.com/
Norcini focuses on the entrails of futures trading and is much more confident:
"In times past, a $50 rout to the downside would have seen massive fund long liquidation. ... Not this time. ... Someone wanted gold and they wanted it badly enough to step in front of a market that appeared to be in a free fall, not only stemming the decline, but completely reversing it and driving it to a record high in the process!
"This week belongs to the bulls who administered one helluva thrashing to their enemies."
A week in which a major French bank can be endangered by the behavior of one young trader is clearly classical from the point of view of the new breed of gold bugs who think the metal's trading is manipulated to hide financial system risk.
As Freemarket Gold&Money Report's James Turk remarked:
"When people become fearful about national currency because of inflation, bank problems, counterparty risk, etc. (as is now the case), they increasingly turn to gold. Their demand for national currency falls and their demand for gold grows, causing the price of gold to rise."
Still, something new is happening in this gold bull market. Bill Murphy's manipulation-minded Le Metropole Cafe Web site (http://www.lemetropolecafe.com/) has been reporting for some weeks that India, long the biggest and most dependable buyer of gold, has finally been out of the market.
On the other hand, the Gold Anti-Trust Action Committee, the gold conspiracy group partly founded by Murphy, has reportedly succeeded in placing an advertisement in next Thursday's Wall Street Journal expounding its thesis.
Is a sentiment watershed at hand?
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