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Nov. 30, 2011, 12:01 a.m. EST

Gold likely to be higher at year’s end

Commentary: Sentiment continues to support higher gold prices

By Mark Hulbert, MarketWatch

CHAPEL HILL, N.C. (MarketWatch) — Sentiment conditions continue to support higher gold prices.

It was one month ago that I last devoted a column to gold market sentiment, reporting that bullishness had dropped to its lowest level in two-and-a-half years. ( Read my Oct. 26 column, “Why gold is rallying.” )

Though gold did rise $150 an ounce over the subsequent two weeks, bullion today is only modestly higher than then. It’s time to take a fresh look at the sentiment picture.

Consider the average recommended gold market exposure among a subset of the short-term gold market timers tracked by the Hulbert Financial Digest (as measured by the Hulbert Gold Newsletter Sentiment Index, or HGNSI). This average currently stands at 13.7%, which means that the bulk of timers’ gold-oriented portfolios is being allocated to cash.

To put that in perspective, recall that gold is now trading at more or less the same level it was early last August. Yet the HGNSI then was nowhere near as low as it is today; in fact, it then got as high as 67% — one of its highest level in several years.

In other words, gold timers then were inclined to see gold’s glass as half full, or even three-quarters full. Today, in contrast, even though gold’s glass is in fact just as filled as it was then, gold timers are seeing it as mostly empty.

One way of viewing gold’s sharp correction in the late summer and early fall is that it was necessary to work off that excessive level of bullishness, which stood in the way of gold continuing to rally. Today, in contrast, that bearish slope of hope has given way to a bullish wall of worry.

Additional evidence for this wall of worry comes from the HGNSI’s behavior at gold’s various correction lows over the last year: With each successive low, the HGNSI dropped to an even lower level.

http://www.marketwatch.com/story/gold-likely-to-be-higher-at-years-end-2011-11-30?reflink=MW_news_stmp

Why Gold Isn’t in a Bubble (moneyshow.com)

Friday, November 18, 2011

View VIDEO of this transcript    Commodity expert John Stephenson from First Asset Investment Management explains why he does not think gold is in a bubble, and how high he thinks gold can climb, in this exclusive interview with MoneyShow.com. We're talking precious metals today with John Stevenson. John, is gold in a bubble? Absolutely not. In fact, I think what you're going to see is gold hitting $3,000 an ounce way before you ever see it dipping below $1,500 an ounce. So I think the best days are yet to come for gold investors. Give us a little context for that. Why you view that as not being in a bubble, and why you see so much potential ahead? Sure. Well, gold, as well as silver for that matter, have been historical currencies for thousands of years. In fact, we were on the gold standard in the US for many years, and the world was, the Western world was. What we're seeing around the world is really a follow through from the 2008-2009 crash, where we saw consumers and businesses heavily indebted,. All that happened in the intermediating years is the government stood in and they were the spenders of last resort, and so the risk was transferred from the household sector to the corporate sector to the government sector. We know these governments are broke because Greece is on the front page of the newspaper every day. Europe is on the front page. Is the European Union going to hold together? What about the debt ceiling in the US? What about Obama and his speeches? Will we get some physical stimulus from the US government? Will it get through Congress? This has got people spooked. People are worried about political gridlock on both sides of the Atlantic. And they're saying, I think, the only way out of this mess is for governments to print money. Because after all, it's a lot easier to pay off your debts in inflated dollars than it is to go the root of austerity, as the Greeks have shown us. This has made people flock to these precious metals. Not only gold, but silver and diamonds as well are up over 30% year to date.

http://www.moneyshow.com/investing/article/43/VideoTrans-25448/Why-Gold-Isnt-in-a-Bubble/#

How Will the Yen Intervention Affect Precious Metals? (Wall Street Cheat Sheet)

By Eric McWhinnie

October 31 2011

The relationship between the US dollar index and precious metals is an important one to respect.  Last week, the dollar index experienced a sharp decline as the EU plan offered support to the euro, which is the largest weighted currency in the dollar index basket.  As a result, gold and silver had a terrific week.  Now, the Japanese yen is sending the US dollar sharply higher, and precious metals lower.

The Japanese yen is the second largest component of the US dollar index.  Early Monday, the Japanese government sold the yen for the second time since August after hitting another post-World War-II record high against the dollar.  A currency intervention is often considered a way to boost exports.  “We started currency intervention this morning in order to take every measure against speculative and disorderly moves and to prevent risks to the Japanese economy from materializing,” Prime Minister Yoshihiko Noda told parliament.  The intervention came after the dollar reached a low of 75.31 yen, and the intervention sent the dollar surging to 79.53 yen.  The Bank of Japan confirmed the intervention, but did not comment on the size of the action.  “It’s been massive, really, that’s the only word to describe it,” said Michael Turner, strategist at RBC Capital Markets.  “From what we gather, it’s larger than their most recent intervention.”

On Friday, gold futures for December delivery closed at $1,747.20 per ounce, while silverfutures settled at $35.29.  We have been warning our premium subscribers that the dollar index broke a critical support level, and was due for a pullback into the 73-76 range.  Last week’s strong decline in the dollar index confirmed this, and gave gold and silver the strength to break out of their respective trading ranges.  As the charts below show, gold broke through $1,700, while silver broke through $34.

On Monday morning, the large Japanese yen intervention move sent the dollar surging higher and dollar denominated assets lower.  Gold reached as low as $1,705, while silver fell to $34.09 in morning trading.  “Gold and other precious metals are being knocked this morning by profit-taking and the strong US dollar,” said analysts at Commerzbank.

Going forward, many believe that this is not the end of the road for gold and silver.  “After a short period of consolidation in gold, I believe it will continue upward progression,” said Jeff Wright, managing director at Global Hunter Securities. “We are comfortable with gold rising back to $1,800–$1,900 level in early 2012 with a spike above $2,000 in the first half of 2012.”  The US still faces problems of its own.  The Congressional Super Committee, a bipartisan committee, is fast approaching its November 23 deadline to find $1.5 trillion in deficit cuts.  According to bond strategists at CRT Capital Group, 38.5% of survey respondents believe a failure to reach a deal by the Super Committee would lead to another downgrade of US credit by the end of the year.  As we discussed in a previous article, the last US credit downgrade sent gold surging 13% in about two weeks, while silver gained 10%.

http://wallstcheatsheet.com/gold/how-will-the-yen-intervention-affect-precious-metals.html/