Is gold vulnerable at these levels?

Posted Dec 8th 2009 7:00PM by Connie Madon
Filed under: Major Movement, International Markets, Analyst Reports, Forecasts, Competitive Strategy, Market Matters, Personal Finance, Commodities

Gold has been on a tear, rallying to above $1,200 per ounce. Is gold vulnerable at these levels?

Commodity markets a quite unpredictable. Last week spot gold soared to a new high of $1,226.30 per ounce. The US dollar hit new three month lows. It seemed that all was well in wonderland.

Then last week the news of a possible default of Dubai's Dubai World debt sent the markets reeling. The dollar rallied sharply and gold fell over $50.00 per ounce. Then it was announced that Greece may be in trouble repaying its debt.

On a technical basis the US dollar index rose above its 50 day moving average. World traders had been short dollars and long gold. When the dollar rallied, traders had to sell their dollars to cover their gold positions. Such a sudden turn of events has raised havoc in both markets.

Now, some analysts are saying that gold could drop to $1,100.00 per ounce. Little new buying is expected until the end of the year.

As an aside her, be careful when almost everyone says: "buy gold." Analyst Dennis Gartman said: "The public has become enamored with gold and actually believing that gold is safe. It is anything but safe."

As always, keep an eye on the dollar. The bull run in gold and the bear raid in the US dollar may stall here for a while.

When confusion reins, stand aside until the dust clears.

Would you buy gold on dips?

Tags: commodities, dubai, gold, greece

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Reader Comments (Page 1 of 1)

12-08-2009 @ 9:30PM

Peter Van Schaik said...

I thought gold was vulnerable once you pronounced, less than a week ago, "...the sky is the limit..." when it came to gold. Of course if too many people jump on the " Gold has nowhere to go but down" bandwagon I reserve the right to switch positions. Investing Rule Number 1: No matter the market, we all can't make a killing, in real terms, doing the same thing. It's just simple mathematics. http://jpetervanschaik.googlepages.com

12-10-2009 @ 4:17PM

Raphael said...

Depending on the ratio you look at, you could make a case that the current dollar price of gold is either relatively fair or completely overvalued. In this post I make a case that the ratios in favor of the "fair price" view are the most sensible ones:

http://raphaelkahan.blogspot.com/2009/12/gold-is-this-bubble-yet.html