Przemyslaw Radomski Says Gold Likely To Go Up

In an article primarily devoted to the U.S. dollar, in which he (correctly) said that the currency was overextended on the upside, Radomski predicts that a fallback would be good for gold. On the second page, he notes that the correlation between gold and the U.S. Dollar Index is returning to negative. Hence, a pullback in the U.S. Dollar Index is likely to push gold up.


So far, he's been right on both counts. However, the greenback drop and gold gain he expected might have already come to fruition.

Indian Gold Imports For March Up From March Of Last Year

As of March 25th, imports were between 28 and 30 tons; that's markedly up from 4.8 tons for March of 2009.

Demand may stay strong, fueled by as many as one million marriages planned for April and May...supporting a 21 percent gain in global prices in the past year. Gold is bought during marriages as part of bridal trousseau or gifted in the form of jewelry by relatives. The wedding season in India runs from November to December and from late March through early May.

“Even a marginal increase in the global price won’t hurt demand as the rupee is gaining” shielding local buyers from variation in prices of gold denominated in dollars, Hundia said.

Gold Confounds Last Week's Pessimism

According to Peter Brimelow, sentiment for gold was awful last week.

On Wednesday, MarketVane's Bullish Consensus for gold broke below its 2010 low to 68%, a level not seen since January 2009. The Hulbert Gold Newsletter Sentiment Indicator [HGNSI] dropped to 18%, last seen during gold's low last month.

A head-and-shoulders pattern, discussed here last week, made technical analysts such as Martin Pring bearish. Now that the pattern's been busted, thanks to gold rising and staying above $1,100, gold ended up rallying from an oversold condition. It's been quite a "relief" rally (so to speak) since last Friday.

WGC Forecasts Chinese Gold Demand Doubling Within Decade

The World Gold Council has issued a report, excerpted here, which pegs gold as underowned by the People's Bank of China and the Chinese. Although Chinese gold holdings have increased at an average rate of 13% yearly over the last five years, the WGC has used a more conservative 7.2% annual benchmark rate for this year and the nine following. They did allow for the possibility that demand would grow more rapidly, though.

Of interest to peak-gold watchers, at least, is this prediction regarding Chinese supply:

The report also predicted that China's gold mines would not keep pace with demand and could even be exhausted within six years....

During the last decade, Chinese gold mining producers have stepped up production by 84pc, although its known reserves account for just 4pc of total known global gold reserves, the council said.

Assuming these figures are correct, it estimated that China could exhaust its known gold mining reserves in six years' time.

Of course, the PRC isn't the whole world. Predicting a supply-and-demand imbalance on the demand side is nice, but it could be compensated for by imbalances on the other side in the rest of the world. China's an important player, though, and such an imbalance in the PRC will help the gold price ceteris paribus.

Personal Spending, Income In Line With Expectations

Individual spending by U.S. consumers rose 0.3% last month; personal income rose less than 1%. Both results were in line with expectations.

"Today's data was clearly consistent with recent trends," said Scott Hoyt, senior director of consumer economics for Moody's Economy. "Spending isn't blowing us away because consumers are clearly suffering from a lack of income."

Both the gold and the U.S. Dollar Index were unimpressed. The results had little effect, either way.

Gold Gains Overnight, Helped By Weaker Greenback

The Grecian government is going to the bond market again; the news trimmed the Euro's gains against the greenback. The U.S. dollar still fell this morning, and that drop helped gold get back up above $1,110 in the same timeframe.

The first night session of the week began with a sizable jump, to above $1,113. That level failing at the time, the jump turned into a spike as the price descended to the $1,110 level. A further descent later in the night (ET) took the price down below $1,105 between 9:00 and 11:00 PM. After bottoming right in the middle of that timeslot, gold pulled up and then dawdled slightly above $1,105 until 2:00 AM. At that time, the metal started a rally that pulled it up above the $1,110 level. Since then, gold has been fluctuating just above $1,110. As of 7:54 AM ET, the spot price was at $1,110.60 for a gain of $3.50 since last Friday's close. The Kitco Gold Index attributed -$1.10 to predominant selling and +$4.60 due to weakening of the greenback.

The U.S. Dollar Index actually started the night session climbing. From 5:45 PM to 8:00, the Index went from 81.25 to 81.6. Subsequently, though, it gave up more than its gains in a slow but accelerating decline that took it down to 81.16 by 4:40 AM. That was slightly after the time that gold made its overnight peak. Since that time, the Index has rebounded into a ragged trading range centered on 81.28. As of 8:07 AM ET, it was at 81.31.

The strenghtening euro, overall, was the cause cited by a Wall Street Journal article, which notes that gold has made a one-week high. Gold isn't the only commodity rising, either. As far as last night's rise is concerned:

While gold lacks momentum it is well-positioned for a rise, said Standard Bank analyst Walter de Wet, who noted speculative longs in gold declined some last week.

Hedge funds in Asia were initially pushing the metal up in an attempt to hit stops in the market, [Commerzbank trader Michael] Kempinski said. Much will depend on the New York open, he said.

So, it seems that there are big boys on both sides of the trade, at least as of now. The ramp-up at the start of the night session was seemingly an attempted short squeeze.

The Euro's rebound was brought up by a Reuters article, which also mentioned "strong physical buying" as another driver.

"The market thinks this Greek problem has been solved. (Also) we saw excellent physical demand last week and it's still continuing this morning," said Afshin Nabavi, head of trading at MKS Finance.

"If we can get above the $1,115 area we should see further short covering."

Also covered is a World Gold Council report forecasting a doubling of Chinese physical demand over the course of this decade. In addition, a terrorist incident in Moscow seemed to add to the price. The SPDR Gold Trust (GLD)'s holdings were unchanged last Friday.

A Bloomberg article, as webbed by Business Week, ascribed gold's rise to a weaker U.S. dollar.

A weaker dollar “is giving a helping hand to gold,” said Afshin Nabavi, a senior vice president at bullion refiner MKS Finance SA in Geneva. “Demand for physical gold continues to be strong,” particularly from Asia, he said.

The Euro's rise was attributed to the carving of a standby rescue package for Greece and any other EU nation that has trouble borrowing. Also included is speculation that gold will stay above $1,100.

Regular trading opened with a jump-up, which turned into a spike as the U.S. Dollar Index began to rally after dipping earlier in the hour. As a result, gold shaved off more than half of a spike-up to above $1,114. As of 8:45 AM ET, the spot price was at $1,112.00 for a gain of $5.30 since Friday's close. The Kitco Gold Index assigned +$1.70 to the predominant-buying category and +$3.50 to the weakening-greenback category. The U.S. Dollar Index, after an initial drop to below 81.25 as of 8:25, managed to rally up to 81.38 by 8:47. As of the next minute, it has pulled back slightly to 81.37.

The optimism is clearly coming back to the gold market, now that $1,100 has been sustainably surmounted. As the bloom is currently off the greenback's rose, due to a near-term resolution of the Eurocrisis, the biggest down-driver to gold has abated. If the $1,115 level is reached, then it'll be an interesting day in the gold market.

However, the possibility of a relief rally for the greenback shouldn't be dismissed out of hand

Financial Sense Newshour Touches On Gold Bubble

In the usual way, during an interview with John Doody about gold stocks in the third segment of the program [.mp3 file.] Doody said that, based upon his valuation models of proven and produced ounces, the major gold stocks were undervalued by more than 10%. Times when gold stocks are undervalued at that level tend to lead to 10%-or-more overvaluation the next year, but gold itself would have to co-operate to make that overvaluation a reality in 2011.

Doody had an affection for gold royalty stocks, in large part because of their dividend policies. He thought that Royal Gold and Silver Wheaton could be doubles by about 2012.

Regarding a gold bubble, the same talking point was unveiled: despite ads popping up from gold companies to buy gold, the general public isn't really in on the market. The gold shows haven't been that popular amongst the general public. Except for the big names continually unveiled by gold bulls, there's little to no institutional-investor interest in gold stocks. That's in part because the seniors pay little or no dividends, even though their cash flow is coming in strong.


There's little to say at this time about those points, as they're true. Myself, I believe that gold's in a nascent bubble, and will expand into an all-out bubble once a real driver kicks in.


The rest of the podcast largely deals with the new health-care reform legislation.