Gold for February delivery added $26.60 to close at $1,726.70 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,731.50 and as low as $1,703 an ounce while the spot price was adding $13, according to Kitco's gold index.
Ross Norman, CEO of Sharps Pixley, believes the move pulled gold over key resistance levels and that prices will climb steadily higher from here. "Longer term gold players were greatly encouraged by Mr. Bernanke's comments," says Norman, "and there will be a general rebuilding in positions on the Comex." Norman says that as of the end of last week there were only 120,000 long positions on the Comex -- around a three year low -- suggesting that any kind of long interest would be supportive of prices. Gold's rally was three fold. The first leg of the move was rapid short covering. Many traders had been selling positions and/or shorting gold headed into today's options expiration, and the Fed's announcement forced them to quickly buy back positions. That move pulled gold prices to the $1,700 an ounce level, which then triggered buy orders, where traders previously committed to buying gold at that price. A close at $1,700 also then triggered buy orders internationally. The SPDR Gold Shares (GLD) added 9 tons of gold yesterday. "We will move gently back to the $1,900 level over the next few months," says Norman, "but won't happen rapidly." Norman thinks the Fed in essence squashed gold's recent period of price consolidation, but that a huge spike up isn't in the cards. One of the biggest drags on gold will be the situation in Europe and a better economy in the U.S. "I do think one of the big drags is that the U.S. is placed to make a recovery better than others," argues Norman, which might at some point help support the dollar and weigh on the euro especially if questions remain over the solvency of the southern Eurozone nations. Gold should be seen as a safe haven asset, the worse off Europe gets the more investors should buy gold as protection, but that hasn't been happening as a stronger dollar has trumped as the safe haven of choice. Norman thinks there are four or five years left in this bull-run and that the gold price could double from current levels at its peak. GFMS, an independent research consultancy, on the other hand, thinks that the bull-run could end in 2013. GFMS, in its 2011 Gold Survey report, forecasts a volatile year for gold prices with gold sinking as low as $1,600-$1,550 an ounce, averaging out at $1,760 and perhaps spiking to $2,000 an ounce. But then the party is over. "We think the peak would be towards the end of this year or maybe in the first half of next year," says Neil Meader, research director at Thomson Reuters GFMS. The main end to gold's 10 year bull run would come with a renewed faith in currencies as the structural imbalances that have impeded paper money slowly start to fade. So far there have been no revisions made to this forecast since the Fed's announcement. David Banister, chief investment strategist at TheMarketTrendForecast.com, still expects the gold bull run to come to an end in 2013, but says this is the big leg up that will eventually take gold to record levels. Banister is looking for gold to hit some resistance around $1,780 an ounce but then proceed higher. "
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