Gold Review for Tuesday 6/02/09

By: By: Thomas Hartmann | Date: 2009-06-02

-- Posted Tuesday, 2 June 2009 Source: GoldSeek.com

Aug Gold: Open= 982.8 High= 988.3 Low= 970.5 Last= 982.9 +5.9

For the second day in a row, the gold market consolidates above the $975 price level. The past month of trading saw gold climb $100 an ounce, pricing in better economic news and the deterioration of the US dollar. The general consensus regarding gold is one o f bullishness. There are some who remain somewhat neutral to gold due to the relatively high price when compared to other commodity sectors, but there are very few aggressive bears currently, or at least few outspoken bears. Unfortunately, the latest COT report shows a large net build of long positions in the market, perhaps enough to cause some traders to think twice about adding to any positions at these levels. It often only takes a lack of buying to push a market lower. The bias in direction will depend largely on the US dollar for the time being, and it appears the dollar will not have pressure removed anytime soon. Leaders of Brazil, Russia, India, and China (BRIC) will be meeting on June 16 to discuss a range of issues, the most pertinent being the role of the dollar as the global reserve currency. &n bsp; Already, China and Brazil are doing business on a yuan/real basis and Russia has long favored ditching the ‘petrodollar’ in favor of trading in euros. These four nations produce about 15% of the world’s output currently and that figure is likely to rise substantially over the next decade. There is a window in the next few weeks leading up to this meeting for a lot of ‘buying the rumor’ activity that could push gold above $1,000. It is possible though that the meeting will produce little tangible news and gold could be susceptible to a let-down correction.

From a day-to-day perspe ctive it can be hard to see the overall trend of this market. Four times over the past year and a half, gold has reached the $990+ level, and for a few sessions only each occasion. Most likely, the severe deflationary pressure of this recession is over and the future remains clouded. The US government would like everyone to think that the Fed is not monetizing debt and that inflation will simply be ‘moderate’ in the future. Traders and investors are betting otherwise. Nations around the world are skeptical of the US dollar’s true value and overall worth, and seek ways to protect themselves from a shaky economy and fiscally bankrupt nation. Gold will likely get through the $1,000 level in the coming weeks. A pullback to $960 should not be ruled out though, as it took the market nearly six sessions to break through resi stance at the level previously, so it becomes an obvious level of support to test on the downside.

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Gold Review for Tuesday 6/02/09

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