So far so good

Gold has held up pretty well over the past month despite some sharp moves up by the dollar. It looks like gold has consolidated in a tight range for just about 4 months.

In the past gold has had a habit of consolidating for long periods and then breaking out. We could see a repeat of that behavior in April-May. The near-term projection of $1350 still looks possible, but the chart looks quite congested with resistance in the $1140-60 area.

Will the markets in general have one last gasp upward in the next month or two? This could bring a burst of speculative fever into commodities and gold. The dollar will undoubtedly feel some upward pressure from the impending threat of rate hikes (maybe as early as Monday), but we finally saw the Yen start to collapse last week. March is the end of the fiscal year for Japanese companies, meaning there is upward pressure on the Yen as companies repatriate money, so the Yen may move down in a hurry from here as risk appetite returns.

The Non-Farm Payrolls report on Friday was a solidly positive number, though the unemployment rate stayed at 9.7%. This might be enough to light a bullish fire under the markets, while the dollar could remain supported by the threat of higher rates. If bonds continue to sag, that’s a good indication that speculation and risk appetite are alive and well.

Friday was a strange day because European participants were absent, and general markets were closed even in the US. The action in currencies seemed to be in the direction of risk appetite with the dollar supported as well, but we’ll have to see what happens Monday, especially because the Fed has announced an unplanned meeting.

Regardless, my personal plan is to get out of everything in May at the latest. I still feel there is a potential crash on the horizon and the bullish exuberance is over-extended, especially if it carries straight through into May. So we may yet see the dollar and Yen spike up later this year. After a good wash-out, it would be wise to get out of the dollar and Yen, and the coast should be clear for gold to run a lot higher.

If we hit a peak of $1350 in the next month or two, will gold then crash down to $600 or so? I think that is getting less and less likely. But it could be a prudent move to wait through the summer when gold is normally weak, and to see where it ends up.

Next week should be interesting.

This entry was posted on 03/04/2010 at 07:14 am and is filed under Gold. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response or trackback from your own site.

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