Gold Makes A Bottom

"We need only take our heads out of the sand to see clearly that interventionism not only has failed to provide the promised something-for-nothing, but has led to all sorts of undesirable consequences. Indeed, many are just beginning to realize that we are moving towards disaster even though we have been on a wrong heading for decades." - Leonard Read

The speculator attack on gold that was endured over the last few months was tried again recently but the successes were limited and the result was that the gold price did not test the previous lows.  Since then gold has consolidated and has been slowly rising from the dead.  The massive short positions held by speculators will need to be unwound and this should result in another positive move for gold but outside of the trade why should gold go higher?

With the continued money printing from America, Britain and Japan not working it is clear that investors are turning once again to the metal as a store of value.  It is also a sign of fear.  As was seen last week with the sudden drop in the Nikkei, money printing can only hold a market up for so long and when the bottom drops it will be fierce.  This fear of market manipulation and the expectation for inflation is showing up in physical demand for gold and this is putting the brakes on any speculator lead attack.  Furthermore, as I have mentioned, speculators have a very short timeline and once that timeline draws to an end they need to close out their positions.  Now if they do a good job and manage to create a market panic then investors start to dump their positions right at the time the speculators are buying theirs back.  As the speculator is buying back their position into a weak market they make a small fortune on the trade.  Alternatively, if the market does not panic they are forced to buy into a strong market causing a massive spike in the price.  As investors did not panic and are buying physical gold in ever larger quantities I am expecting the latter to play out relatively soon.

One trader that I follow closely is Peter Brandt, a commodity trader who has successfully traded all commodities for years.  He has his hand on the pulse of the commodity markets and made a good amount of money betting on gold's decline.  I was therefore very interested to note that the other day he tweeted that he felt that the next major market bull move would take gold to $17,000 an ounce!  Now I am not sure how he came up with that number and I cannot fathom gold that high, but I do expect a massive run in the price of gold and advise you to take advantage of this move.

If you do some research you will find that gold stocks have been pummeled a lot harder than the drop in the gold price so I would start your research with them as to me they have hidden value that is greater than buying the physical commodity.  One thing to be warned of is that while gold is a very volatile commodity, these stocks are even more wild so if you do invest make sure that you do not get shaken out as you will then end up being speculator lunch!