Gold Prices Forecast December 24, 2012, Technical Analysis

The gold markets bounced off of the $1640 level during the Friday trading session in order to form a hammer. This is a very supportive sign in a market that has been beaten rather drastically. We believe that a lot of the failure of the buyers lately has been a result of end of year selling rather than any type of fundamental reason. Granted, the markets have been very fearful because of the so-called “fiscal cliff” talks, and this has only exacerbated the “risk off” trade. However, as we enter the new year we should see more and more bullishness coming into this marketplace.

Although we generally don’t like being involved in the marketplace during the week of Christmas, we have a strong enough view on gold for the longer-term that we are willing to buy a break of the highs for the Friday hammer. This is because we not only believe in the short-term bounce that should be coming, but also hold the GLD ETF that serves as a proxy for gold futures. This is our non-leveraged approach to the markets that allow us to stay long even when there isn’t enough bullishness to be involved in a highly leveraged market like the futures market.

We also hold physical gold, and as a result use this market as a way to boost our returns when bullishness reenters the market. We never sell gold, simply because we believe in the long-term viability of the yellow metal, especially considering we are in a world that has several central banks printing currency as fast as they possibly can. On top of that, most of these central banks are also buying gold, so this of course means that there is a natural bid underneath the market overall.

We still believe that gold will be higher during the year 2013, and in fact would not be surprised to see an $1800 print before June. Alternately, a $2000 price is more than possible; it’s only a matter of how long it takes to get there. Because of all of this, we obviously love this market.