Skepticism Still Abounds

Clearly, there's still skepticism about gold even though its bull market has been running for ten years. An article in the U.K.'s InteractiveInvestor, discussing the World Gold Council report showing gold demand outpacing supply in tonnage terms last year, has two quotes from gold skeptics with only one from a gold bull. Here's the first

Patrick Connolly, financial planner at AWD Chase de Vere, said: "Gold has risen hugely over the past decade and the easy money has been made. It would be no surprise if the price of gold falls over the next 12 months and it could fall quite fast.

"Asset prices tend to overshoot in bull markets and fall too heavily in bear markets. If the price of gold does continue to rise this year it is likely that the fallback, when it happens, will be even more dramatic.

"We are wary of investing money into any asset that has risen so much in value and encourage investors not to be enticed by short-term market sentiment or recent past performance."

The second quotee, a financial planner at Thomas Westcott Financial Management, says he expects gold to fall as governments get their fiscal houses in order.


Even with gold's run, it's not that hard to find gold skeptics. In fact, gold's bull market tends to make hardened skeptics dig in their heels right now. If gold was overpriced at $1,000, how much more so at $1,400! I should add that many of the skeptics are so out of ignorance.

The best market for wearing down skeptics on their own is like the one we have now: advances followed by pullbacks followed by consolidations, over a long period of time. A rip-roaring bull market doesn't deter skeptical professionals per se: at that point, they tend to give in because angry clients and/or bosses yell at them for missing out. They tend to capitulate cynically at that point, and join in at the blow-off top.


While we're on the subject, here's a reminder of how wavery the coverage was back when gold hit $1,310.

[R]eports were everywhere that gold was in a correction and prices were on their way down to $1275 an ounce - maybe even $1225. Expert after expert was paraded past us on the financial channel, saying gold was losing [its] luster and that the Fed's QE policies were going to drive stocks to the moon.

Now... gold has some surprises of its own. Warren Buffett is said to be selling stocks and gold did the opposite of what the geniuses said it would do. Not only did it not drop below $1300, but, today it rose above $1400. Let's not leave silver out of the conversation, either. Less than 30 days ago silver spot dropped as low as $26.50 an ounce. Today, it broke above $34 for a short time.

The wall of worry still stands.

The Yukon: Host To New Carlin Trend?

An article in Gold Mining News, although speculative, says there is that potential:

In an interview with the Resource Investing News Network, Mike Burke, current Chief Geologist at Golden Predator Minerals, and previously head of mineral services with the Yukon Geological Survey, commented on some facts obtained in his decades of experience in the Yukon. “The primary evidence is the fact that the Selwyn Basin, in the Yukon, has the same geological history as the Great Basin in Nevada,” explained Burke.

Burke added that the rocks in the Selwyn Basin are so similar to those of the Great Basin that he could take rock samples from the Selwyn, and drop them on the ground in Nevada, and no one would even notice that the rocks were not from the region. Burke also added that he has looked over cores from the Selwyn Basin with geologists who have worked primarily on the Carlin Trend in Nevada, and they commented that the rocks looked practically identical.


Many geologists have believed in the Carlin potential of the Yukon for many years, and with recent advancements in exploration, the evidence is mounting....

The main reasons why exploration has been hampered until recently are isolation and the short summer. Until relatively recently, the exploration season was only four months out of the year.

Now, exploration can be undertaken during the entire year thanks to infrastructure improvements. Exploration spending in the Yukon totaled $160 million last year and is set to double this year.

The article contains a partial list of companies active up there:

Constantine Metal Resources Ltd. (CVE: CEM)
Carlin Gold Corporation (CVE: CGD)
Northern Freegold Resource Corp (CVE: NFR)
Colorado Resources (CVE: CXO)
Golden Predator Corp. (TSE: GPD)
ATAC Resources (CVE: ATC)
Kaminak Gold Corporation (CVE: KAM)
Taku Gold Corp. (CVE: TAK)

Consumer Confidence Jumps Up In February

Hard times are still evident in the United States, but consumer confidence is less reflective of them. The latest reading is a three-year high of 70.4, from January's 64.8; expectations were for 66.

“Looking ahead, consumers are more positive about the economy and their income prospects, but feel somewhat mixed about employment conditions,” Lynn Franco, director of the Conference Board’s consumer research center, in a statement....

The report for February is the first using a new survey provider, but the questions were unchanged. Data have been restated back to November, but older data can be compared with new results, according to the Conference Board.

Maybe. Hard times still peek through: a reading of 90 or above is consistent with an economy growing at a healthy clip. The biggest jump was in the consumer expectations subcategory, although assessment of present conditions grew as well. A huge divergence (in number terms) exists betweeen the two subcategories right now: 95.1 for expectations, 33.4 for current conditions. Evidently, there are a lot of hopes out there.


Although less current, the Case-Shiller Index of house prices showed a drop of 1.0% for December. Home prices were hugging the bottom of the trough at that time.


Gold didn't take the numbers very well, but its drop was largely confined to discounting the consumer-confidence news before release. After dipping to a little below $1,400, and staying there for about a half an hour, it added a few bucks an ounce to get back up above $1,400.

Mark Hulbert's Contrarian Analysis Says Run Is Solid

Gold's run close to $100's worth since its Jan. 27th low. In his latest Marketwatch column, Mark Hulbert says the run-up has been accompanied by an unusual amount of skepticism.

In early December, for example, when gold hit what so far has been its all-time high, bullish sentiment was nevertheless much lower than it had been on several other occasions over the previous several years. And over the subsequent six weeks, during bullion’s $100 correction, what bullish sentiment that had existed rapidly evaporated.

On both counts, contrarians could detect little of the enthusiasm and outright exuberance that signals an imminent major decline.

And, sure enough, gold’s correction turned out to be quite modest, and bullion is now back to within shouting distance of its early December high....

The $64,000 question now, of course, is whether gold’s rally will soon take the yellow metal into new high territory. Contrarians are betting that it will.

That’s because the mood among gold timers remains quite restrained. The HGNSI currently stands at 45.3%, just half of its all-time high of 89.6%. In other words, despite gold being only a few dollars shy of its all-time high, the average gold timer is still allocating more than half of his gold portfolio to cash.

He adds a caution that the skepticism doesn't guarantee a challenge of the current record high, but he does specify that skepticism means untapped reservoirs of bullishness.


I think I know why the gold timers have been so cautious right now. After a big run, gold normally waits several months before continuing again. Any run like the current one is going to be discounted because a consolidation phase implies it's not going to go very far before tailing back. Timers just don't see potential for a really big gain right now.

As for skepticism back in the fall, it's likely due to timers watching ETF figures and not seeing record holdings as the metal advanced. They evidently underestimated physical (and, in India at least, jewelry) demand taking up enough to keep the rally going.

Gold Rises In Rupee Terms, Deterring Physical Buyers

According to a Reuters report webbed by the Economic Times, Indian physical gold buying faded as prices went up in rupee terms.

"At every high there is resistance and people are now edgy about the 21,000-rupee [per 10 grams] mark," said a dealer with a state-run bank in Mumbai that imports bullion.

Normally, the dealer quoted gives a figure on how much he booked. There may have been no deals this time.

Gold Pulls Back, Slumps Below $1,400

Yesterday's rise to almost $1,410 was encouraging, but was not built on in tonight's and this morning's overnight session. Things looked good at the start, as gold touched $1,410 and even poked above it, but that rise turned into a steady decline that brought the metal down to $1,392.10 without many recovery breaks. Bottoming at that level, it finally reversed and trundled back up to the $1,400 level. As of 8:08 AM ET, the spot price had poked its nose above $1,400 to reach $1,400.40 for a drop of $6.20 on the day. The Kitco Gold Index split the loss into -$5.20 due to predominant selling and -$1.00 due to strengthening of the greenback.

The U.S. Dollar Index, after initially sagging, went on a nice run last night that mirrored gold's drop. From about 77.65, it strode up to above 78.15 betwen 7:05 PM ET and 10:10. Then sinking back to almost 78, it forged ahead to almost 78.35 before tumbling all the way down to the 77.7 level. As of 8:16, it was slowly recovering at 77.78.

A Bloomberg report said gold's six-day winning streak was broken because of the greenback's recovery, occurring as the Libyan government cracks down on protestors.

“The stronger dollar is pressuring gold prices in the short term,” said Bayram Dincer, an analyst at LGT Capital Management in Pfaeffikon, Switzerland. “We expect gold to trade higher, as geopolitical uncertainties will result in higher gold demand.”...

“The desire to take profits grew among short-term investors after gold’s recent rally,” said Lim Chae Myung, Seoul-based trader with Hyundai Futures Co. “Coupled with a stronger dollar, that’s taking some steam out of gold, but I don’t believe this is a trend reversal.”

The article also cites the International Federation for Human Rights, which said more than 300 protestors have been killed by the Libyan government. Quadaffi, unlike Mubarak, isn't going down without a major fight.

An earlier Reuters report ties gold's earlier gains to inflation worries caused by the Mideast uprisings, as reflected in oil's jump.

"I think the current situation there is really akin to a keg of dynamite," said Ong Yin Ling, investment analyst at Phillip Futures in Singapore.

"Whether Gaddafi will be toppled or whether we will witness a revolution, I think the final outcome is still uncertain. But the situation is likely to get worse before it gets better. Going forward (gold) could still remain supported due to the crisis, which is unlikely to be resolved anytime soon."...

Diplomats at Libya's mission to the United Nations sided on Monday with the revolt against their country's leader and called on the Libyan army to help overthrow "the tyrant Muammar Gaddafi."

The article also noted that physical gold selling has appeared from Thailand and other Asian nations on the Singaporean market. There had been safe-haven buying at lower levels.

A Wall Street Journal article said the greenback crowded out gold in the flight to safety race as liquidity becomes attractive too.

"When it comes to traditional safe-haven assets, the most popular are treasury bonds, the dollar and gold," said Crédit Agricole analyst Robin Bhar. "At present, people are likely looking for the most liquid asset they can find, and, in this sense, gold may be being viewed as the poor third cousin of the three."

In keeping with the fear trade, base metal have been hit recently while gold (and silver) have risen.

No data pertaining to the U.S. economy were released in the 8:30 slot, so gold fluctuated without any influence from that corner. Dipping back below $1,400 just before regular trading opened, the metal reversed course once the pit session got rolling; it jumped to $1,405.40 before pulling back. Even after the pullback, it stayed above $1,400. As of 8:39, the spot price was $1,403.40 for a drop of $3.20 on the day. The Kitco Gold Index divided the loss into -$2.60 for predominant selling and -$0.60 for greenback strengthening. The U.S. Dollar Index slumped a bit but recovered enough to surmount 77.7; as of 8:42, it was at 77.75.

Yesterday's gain was not endorsed completely by the return of full-day trading, but gold surmounting $1,400 has so far. As for the breaking of the streak, it's not quite a done deal yet. Should gold eke out a gain today, it would be the seventh in a row - a rarity. The metal isn't in a position to do so as of yet, and may not if earlier gains are drained away in the pit session and electronic-trading hitch, but there's still a chance at reversing the loss. It only needs several dollars more.

Gold Rallies Above $1,400 In Quiet Half-Day

Trading was light, but that didn't stop gold from rallying above $1,400 with only two pullbacks. Reaching as high as $1,409.60, the metal ended up sporting a strong double-digit gain. (Due to the holiday, Stockcharts.com doesn't have the six-month charts I normally copy for this report.) As of the end of the truncated session, the spot price was $1,406.60 for a gain of $16.90 since Friday's close. The Kitco Gold Index attributed +$18.75 to predominant buying and -$1.25 to strengthening of the greenback.

A Reuters report gave essentially the same reason for gold's rise as did the morning reports: turmoil in the Middle East and north Africa.

"The unrest and the fear in these countries is increasing," said Bayram Dincer, an analyst at LGT Capital Management in Switzerland. "These uncertainties on the geopolitical risk side are driving the gold market."

"See how easily gold broke $1,390, $1,395, which were strong resistance levels, and now the $1,400 psychological level," he said. "It seems nobody is looking for lower gold prices."

The article also said that gold in terms of euros is rising as well; it's now well above €1000 and approaching €1,030.

The U.S. Dollar Index, unlike gold, had a quiet day with little fluctuation. After inching up to as high as 77.81, it pulled back in late morning and muddled between 77.65 and 77.71. As of 5:30, it was at 77.70.

Since the day was shortened and trading light, not too much should be read into today's rally unless it's endorsed during full trading tomorrow. Still, breaking above $1,400 and staying there is an achievement for a rally that seems to be going nowhere but higher. Although it was common currency to believe that gold would still be hammered by the recovery trade only three weeks ago, that belief now seem like old news. There may be a pullback in overnight trading, but $1,400 may still hold. If so, then more and more eyes are going to be on $1,425.