Robert Lenzner, Forbes Staff

+ Follow

9/25/2011 @ 6:24PM |7,837 views

Gold Prices Bound To Fall Further

3 comments, 1 called-out

+ Comment now

Look for gold at $1662 an ounce to continue its retreat tomorrow in the wake of last week’s rout and the  coup de grace of another rise in margin on gold futures speculation at the commodity exchanges.

As gold began the year at $1400 an ounce and rose spectacularly to almost $1900 an ounce– a run-up of $500 or  about 35%– there are evidently plenty of margin buyers who got in the game between  $1400 and $1662 who are feeling edgy about getting margin calls just at the very moment Europe is in a swoon, and the stock markets everywhere are under great pressure. The next impact point is $1522- the 200 day moving average on gold prices. We’re in retreat for the time being.

Then, too, the dollar has rallied a bit, but is still below its high for 2011, suggesting that if the euro is under pressure, the offsetting trade will be to buy dollars. As I have written many times there is an inverse relationship between  gold and the dollar. When the dollar is weak, gold as an alternative currency is strong. But, when the dollar is strong, gold appears to weaken– at least roughly 70% of the time. You should keep that in mind.

The bailout of Europe or parts of Europe is not set. Mr. Zhou, the governor of the People’s Bank of China said this weekend that  it was too early to know fore certain if the $3 trillion PBOC would step in to  buy sovereign bonds or bank debt. France, as well, declared it has no plans yet to recapitalize the French banks.  It’s hard to tell if this uncertainty is  good or bad for gold. It’s certainly bad for Europe, for European bank stocks, for European sovereign debt issues– and due to send mnore overseas cash into US Treasuries– drivng their yield down further.

The only good news for US equities is the slight decline in the cost of a gallon of gasoline to  $3.54.   Hope springs for a decline in West Texas Intermediate to the $60 a barrel level– which would help the  price of gasoline ease to below $3.00.  The lower the price of oil, the better for the US economy, as lower costs of fuel stock help the margins at every industrial producer, auto sales, airline travel and a host of other businesses. If food prices also decline, that would be beneficial to the American consumer just as the economy is headed into a soft patch that could last until well after 2012.

http://www.forbes.com/sites/robertlenzner/2011/09/25/gold-prices-bound-to-fall-further/

Gold May Top $6,000, Silver $600: Asset Manager (CNBC)

By: Katy Barnato

Published: Monday, 5 Sep 2011 | 7:24 AM ET

Assistant Editor, CNBC 

Gold prices may reach $6,200 per ounce in a bull run which will “end all major bull markets,” Urs Gmuer, asset manager at Dolefin, a Swiss investment advice firm, told CNBC.

Tetra Images | Getty Images

Gmuer’s prediction is based on analysis of the last major gold boom of the 1970s, during which gold prices rose from $35 per ounce to $850 per ounce. Gmuer said that in the current bull run, prices would be pushed upwards by a protracted period of global economic difficulty—potentially lasting years—during which investors would continue to search for so-called safe havens.

“Gold prices have risen over the last few years, as the macroeconomic picture has become worse. The deterioration of the fundamental situation has now gone even further.

“Purchases by investors of gold will be based on fears of systemic risk or banking crashes,” Gmuer said.

The investment manager said that as no "safe" currencies remain, cautious investors had no choice but to opt for precious metals.

“The ultimate currency, which has stood the test of time, which has no political support behind it, is gold. Nobody can print gold out of a machine or a PC.

“What the Swiss National Bank did two-and-a-half weeks ago, increasing the supply of the Swiss franc, means the safe currencies are all gone. That is why gold will have a revival,” he said.

Gmuer said the precious metal had entered a “super-cycle,” which he likened to the 1998-to-2000 boom in technology media and telecommunications.

He added, “This bull trend will end all the other major bull markets,” and singled out debt capital as an asset class for which demand and prices would decline.

However, Gmuer denied that high and rising gold prices could be indicative of a bubble. “If everybody is saying a particular asset is a bubble, that reflects the fact that most people have disposed of it,” he said.

Other calculations indicate that gold prices could peak at $3,500 or $4,000 per ounce. This is based on historical data regarding the long-term ratio of gold prices to the global money supply.

http://www.cnbc.com/id/44373049