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Politics : Israel to U.S. : Now Deal with Syria and Iran -- Ignore unavailable to you. Want to Upgrade?

To: Jamey who wrote (9743)	1/7/2006 7:11:35 AM
From: sea_urchin	Respond to of 22250

James > do you see any of these drivers of gold correcting in the near future. Many of us see that due to these circumstances, gold is and will be in a long term bull for many years. Fundamental to my concern about the gold price is the fact that this bull market has been driven by futures speculation and not by purchases of the metal, as in the past. Hence any justification for the price rise, and also the extrapolation of that rise into the future, must take this into account. In other words, although the gold price has risen for technical reasons, much gold hasn't been sold at the high prices. As you know, I also believe an important reason why the gold price jumped recently is because the shorts were cornered above $500 and had to deliver on their contracts. Hence, although the Ten Points are all reasonable and rational they can be challenged by the simple argument that demand for gold, itself, hasn't increased. But if you ask me, quite frankly, I don't know what is driving the gold price at the moment? Sometimes it's a weak dollar, sometimes it's a strong dollar and weak other currencies and sometimes it seems to do its own thing. At the moment, the USD is showing short-term weakness and the currencies are strong and gold seemed to go up in response to that. But who knows? I would say, however, that general US market looks very dull and gold and gold shares are offering far more excitement and speculative interest. technicalindicators.com >>The rise in the gold price during the past month has been unlike other rallies. The principal divergence now is that the price is rising while the number of long speculators and the total open interest is declining - usually it is the long speculators who push the price up but the number of long speculators in the market now is the lowest in 6 weeks. It is quite unusual to see the price rise as it has in the past month without an increase in long speculators. TOTAL long speculators is at 235,000 (as of December 27, latest available), down from record levels of 292,000 in October. The demand for physical gold although increased in 2004 from the previous year is still lower than the demand in the 1990's when the bull market helped the economy and there was more money to buy jewelry. For example, global demand for gold jewelry was over 3,700 metric tonnes in 1996 compared to only 2,610 in the year 2004. The demand for physical gold and gold coins has not soared as it did in 1979-1980 period in which the gold reached $850 an ounce, although it is still possible there may be improvement in the demand for physical gold as a result of the rise in the oil price which has inflationary implications. A very fundamental issue is whether the gold can continue to rise when supply is up and demand is down and remains at relatively low levels compared to the demand during the 1990's (click for latest supply and demand figures). The gold certainly has enough of the "traditional" positive reasons going for it now. There are some comparisons to 1979-1980, when the gold almost tripled in price in just few months - like now, Crude Oil prices were rising, and the Middle East situation was deteriorating, some hostages being held in Iran more than a year. So far however demand for physical gold has not increased as it did then. <<