Brimelow: Gold Bugs Not Deterred By Drop

Despite gold going through one of its rough spells, Peter Brimelow found that the goldbugs he keeps an eye on were still confident. The recent drop-off in gold was explained by Dan Norcini as caused by Fed figures trying to rally the greenback through speculating about the Fed ending QE2 before its completion.

“…the U.S. dollar’s technical-chart picture is horrendous. It had broken through a critical support level near 77 on the USDX last week and had further descended down towards the tremendously important 75 level. … The ugly truth is that the dollar was on course for a major crisis if it violated the 75 level.”

“Enter the Fed officials today and yesterday. Apparently the strategy was to get several of the FOMC governors to hit the airwaves talking about ending the QE program. … Result? Up goes the dollar and down goes the precious metals market. Coincidence? I hardly think so.”

Gold shares, as tracked by the Amex Gold BUGS Index (the HUI), have been doing much better than gold itself recently. Although that outperformance could be the result of the shares being undervalued, it could also be forecasting better times for gold ahead. Physical premiums in Asian markets have been improving lately to a more normal level.