Gold
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.
Silver
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.
