DAN NARCONI ON THE GOLD/EURO BREAKOUT
Dan Norcini on EuroGold
I wanted to make a few comments about the EuroGold price for the
readers as I got to thinking that many may not understand what all the
hullabaloo is about.
Briefly, E350 gold is as psychologically significant to our European
friends as $400 gold is to us Americans.
By referring to the EuroGold chart, you can see that since the end of
2002, gold in euro denominated terms has basically gone nowhere,
meandering in a very broad sideways pattern. Even for the first part
of this year, EuroGold has not done much more than get back to the
level it was at the end of 2002 when it closed 329.924.
Now, for the first time since February 2003, gold in Euro terms has
poked its head above the multi-year high just above E351. That is
going to have the exact same reaction among the European investment
community as $400 gold did among the U.S. investment community. It
puts gold on the radar screen for an entire continent.
One of the things that has been missing from this phase of the
multi-generational bull market in gold, has been active involvement
from Europe. Thanks to John Brimelow's priceless reporting we know
that gold demand from India, Turkey, the mid-East and from China has
been incredibly strong. We have not been able to say that concerning
Europe to this point.
With the shock waves still hitting the Euro as a result of the "NO"
vote from France and the Netherlands, European investors are moving to
gold as a safe haven. That is what is being indicated from the rising
EuroGold price.
We now have another marble to add to the jar of bullish factors -
European investment demand.
From where I am sitting, the missing ingredient in this cake is still
the Japanese investor. They are renowned as avid savers and the fact
that much of that money has yet to make its way to the gold market,
has been a bit disappointing to me. It is easy to see how a Japanese
citizen would simply exchange yen for Dollars, or Aussies or Kiwis and
purchase their respective ten year notes so as to secure some sort of
decent return on investment. Still, with the global economy looking
soft and an ever-expanding credit bubble showing no signs of abating ,
it is hard for me to believe that at some point in the near future, we
are going to see Japanese investment demand for the yellow metal.
When that occurs, we will have witnessed a breakout in the price of
gold in the three major currencies. That will be the phase that many
of us have long awaited in this gold bull market.
A side note for traders – just as gold in U.S. Dollar terms oscillated
around the $400 level for some time while it built a base at a higher
level, do not be surprised to see the same kind of oscillation take
place around this E350 price.
Dan Norcini
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