Gold Rally next weekby Joe Battaglia Posted: March 6, 2009
Gold is up $7 in early trading and silver is up $.18 on follow through from yesterdays nice rally. It would appear the gold market is going to close above $930 an ounce, which would lead to the expectation that perhaps it will rally into the $950 range next week. A breakout above $950 and there will be a return to $1,000 based on views of technical analysts.
The gold market was stronger this morning on continuing safe haven demand as U.S. non-farm payrolls fell 651,000 in February. This was in line with economist's views, signaling that there is no end in sight for the severe recession that began a year ago.
Gold is performing well in the current environment. Standard Bank said gold's role as a hedge against risk remains "unsullied" and there is scope for further price gains because of that. The Dow Jones Wire Service ran a report entitled "Gold Price Looks Ready to Retest $1,005/oz". They stated: "Spot gold looks like it could trade back towards $1,005 a troy ounce because the last eight days of position unwinding, long liquidation and margin call related liquidation of the market is concluding, says a London based trader. Says gold is trading higher again Friday and has held above important support at $900/oz this week ...' we should look to retest that $1,005/oz high". They added that a move through $1,005 could spark a retest of $1,035.
A number of analysts are also looking further down the road. They see the results of the massive expansion of money supply and monetization of debt by central banks and view that as a situation that will cause currency depreciation and rising inflation. I've also been commenting that a number of central banks appear to be adding gold to their holdings. Yesterday, we quoted the report from "Commodity Online" which forecast that China is a buyer of gold along with Russia and as they move to hedge their position in dollars they would need to purchase $93 billion worth of gold, which could drive gold to above $2,000 an ounce. Today we see evidence of that as the central bank of Kazakhstan increased its gold reserves 7.6% to $2.19 billion.
Clearly, gold is in a buy zone at under $1,000 an ounce. Investors should be accumulating gold at these levels. Merrill Lynch continues to say that gold is a buying opportunity and the economic and geopolitical problems confronting the world will lead to continuing gold demand and higher prices.