Gold may have succumbed to profit taking and has slipped to $992.50/oz. It constantly rebounded to challenge $1000/oz yesterday and if this happens again, gold is likely to regain its momentum and challenge the March 2008 record highs of just over $1,030/oz. If the profit taking continues, fresh investors will possibly wait in the wings to gauge the best entry point. However, the dollar is continuing to weaken and although gold’s movements in the short term may be dictated by currency movements, the news that Barrick, the world’s largest gold producer, is to close the majority of its hedge book is another bullish factor. It signals that Barrick are confident that gold prices are going higher and thus the need to drastically reduce their hedge book. This and continuing concerns regarding the outlook for the dollar should keep investor sentiment towards gold very positive. There continues to be the possibility of a short squeeze whereby large institutions with sizeable short positions are forced to buy back their short positions (in the same way that Barrick had to close their hedge book) causing a sharp increase in the price. This remains a real possibility especially when one looks at the Commitment of Traders report which shows that the open interest is only two thirds of what it when gold reached record highs in March 2008 at $1,033/oz.
$1,200/oz to $1,300/oz remains a real possibility for the gold price by the end of 2009.
After 8 days of continuous gains, some investors were happy to take profits overnight and silver is now trading at $16.38/oz. Silver needs to re-test $16.64/oz and maintain a hold above that to demonstrate that profit taking is over and silver can continue to test the gold/silver ratio of 55.
Platinum group metals
Platinum is trading at $1,280/oz, palladium $293/oz and rhodium is $1,650/oz.