Wednesday, September 16, 2009

Dollar Drop Continues; Gold Hits 18-Month High

This is a very tricky period to forecast the gold price. You have two countervailing forces. Internationally, you have what appears to be a re-heating of the flight from the dollar, which is bullish for gold. The bearish argument begins and ends with the serious fact that the Fed hasn't printed money (M2 nsa) since February.

Gold hit an 18-month high today as the dollar slid near one-year lows against the euro.

In New York, December gold finished $13.90 higher, a 1.38 percent gain, at $1,020.20 an ounce on the COMEX division of the New York Mercantile Exchange. The contract reached a high at $1,023.30 an ounce, unseen since July 2008.

Spot gold remained sharply higher at $1,017.65 an ounce into late New York dealings, compared with $1,005.90 on Tuesday.

I still think the play is on the downside, but again, this comment, as I have stated before, is for short-term traders. Long term accumulators should not be selling.


  1. Wenzel,

    I like this either way because it might mean from a technical standpoint that the 'retrace' will be to a higher low than it otherwise would be, right?

    Btw, your bullish case for gold seems to be independent of inflation/deflation concerns and sounds like the suggestion I made previously, that gold price primarily measures confidence in fiat currency, not expansion or contraction of fiat currency.

  2. I would say that poor confidence in fiat currency is based upon the nature of fiat currency as a good that is easily inflated/corrupted.