Watch out for gold reaching over $1800 this quarter

Ross Norman argues that the precious metal in likely to make more gains next month
Watch out for gold reaching over $1800 this quarter
The euro recovered from the 16-month low it hit against the dollar on Monday
By Will Milner
Tue 14 Feb 2012 09:09 AM

After a rollicking start to the year in which it has gained 12.4% YTD, gold is starting to flat-line, rocking higher and lower respectively on Euro-friendly reports from Greece and dollar positive economic news.

The approval of austerity measures on Sunday by the Greek government has prompted a modest bout of Euro strength, the corollary to which has been modestly firmer gold prices. But the gold price rise is relatively muted which cynics might point to as a surefire indicator that Papademos may have difficulty in persuading his people to take it on the nose yet again - others might suggest it was just a ruse to secure a second bout of aid. In short, if the gold price is saying anything, it is saying "we don't believe you". After three days of intense rioting in Athens, many will agree.

Meanwhile the DJIA has surged 4.8% on the year to date on signs that the US economic recovery is gaining momentum. Jobs and housing are amongst the most closely scrutinized data but tomorrow's retail sales figures (expecting a 0.7% gain) will give a good measure of sentiment, representing as it does two thirds of US economic growth.

Meanwhile Warren Buffet eschews gold for "productive assets" such as stocks in Forbes in a manner that will ensure he comes off every gold bugs Christmas card list. Buffet describes gold as "neither much use or procreative" before adding "what motivates most gold purchasers is their belief that the ranks of the fearful will grow. During the past decade that belief has proved correct. Beyond that, the rising price has on its own generated additional buying enthusiasm, attracting purchasers who see the rise as validating an investment thesis." As WC Varones says in his article "In trashing gold, Warren Buffett makes the case for gold"  when comparing gold with stocks :

 

- Gold doesn't commit accounting fraud

- Gold doesn't overpay its CEOs with your money

- Gold doesn't dilute itself by issuing stock options to executives

- Gold doesn't have to negotiate with labor unions

 

The near term outlook for gold is looking modestly positive and we would expect a test of overhead resistance at $1762 soon and possibly Novembers high of $1802 later this quarter, while support is pegged at $1709.

 

* Ross Norman is the CEO of Sharps Pixley

(www.sharpspixley.com)

 

 

 

For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.

Subscribe to our Newsletter

Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.