The precious metal had another good day on the markets Tuesday, with spot gold up $24.60 to $1,341.20, on the release of a weak US jobs report.The employment report showed the US economy added 148,000 jobs in September - much lower than the 185,000 jobs some analysts expected. While the term "rally" should probably not be used in this context, an uptrend can certainly be discerned from Kitco's 30-day and 60-day gold charts. The world's largest gold ETF, GLD (NYSEARCA:GLD) is up 1 percent over the last month and 4.5 percent over the past five days. The bettering of the bullion price has translated into stronger performances from gold miners and explorers, too. Over the last month, the Gold Bugs Index is up 3.6 percent and over the last week, it's gained 10.1 percent. Major beneficiaries include Barrick Gold (NYSE:ABX, TSX:ABX) (up 15.3% over 5 days), Newmont (NYSE:NEM) (+11%), Goldcorp (NYSE:GG, TSX:G) (+10.7%), and Anglogold Ashanti (NYSE:AU) (+24.6%). More germaine to the junior market, a rally is starting to be seen on the TSX Venture Exchange. In a commentary yesterday, Bullion Run noticed an upward technical move on the S&P/TSX Venture Composite Index (TSXV:OSPVX). "After failed attempts in 2012 and again at the beginning of 2013, theaVentureahas finally broken above a down trendline on a 3-year weekly chart…this move requires confirmation, but what's particularly encouraging is how the RSI(14) is climbing in a trendline and at 47% still has plenty of room to head higher…this is a major technical developmentand suggests to us that theaVentureabear market could indeed be over and thataGoldaprices have bottomed and could surprise to the upside this quarter…theaVentureahas built solid support in the low 900′s and is now at a 5-month high…" Bullion Run also observed that the TSX Gold Index has formed a double-bottom, which in technical trading terms, often signals a move to the upside.
One more interesting trend to note is an apparent gold shortage viz a viz gold demand - another bullish indicator for the price.In a letter to the World Gold Council, Eric Sprott argues that "the massive imbalance between supply and demand is not reflected in prices because available statistics are misleading." They are misleading because the World Gold Council and Thomson-Reuters GFMS consistently underestimate demand, Sprott wrote. From his own analysis, Sprott discerns that annual demand for gold is about 3,000 tonnes more than supply; in other words, there is a gold shortage. In conclusion, writes Sprott: "The evidence presented here is clear, demand for physical gold is extremely strong and, in reality, without the massive outflows from ETFs (half of world mine supply), it is hard to imagine how this demand would have been met. Since ETFs have a finite size (about 1,900 tonnes left), these outflows cannot continue for much longer (see our article on the topic). All these observations point to a considerable imbalance between supply and demand (unless Western Central Banks decide to fill this void with what is left of their reserves)." In another commentary along the same lines, ETF Securities said in a report quoted by Bullion Run that the London Bullion Market Association gold forward rates have turned negative, foreshadowing an apparent gold shortage. "It is interesting to note that LBMAaGoldaforward rates have again dipped into negative territory, highlighting that physical demand - possibly from central banks as well as short covering - remains strong,"aETF Securities says.a"This tightness has continued into the new week, indicating this was not solely short-term pre-debt deadline hedging and post-agreement short-covering demand. It seems clear the fact the U.S. debt issue has not been resolved, but only postponed, is accelerating central banks' and private investors' search for alternatives to the U.S. dollar as a reserve asset, withaGoldaone of the few viable alternatives."
The bottom line for gold investors? Those who haven't sold or shorted the metal may be poised for some short-term gains, as the yellow metal rides on the coat-tails of US economic policy indicating no end in sight for QE, and as the Indian festival season give rise to some much-needed physical demand. The outlook for gold is still bearish, however, so investors should exercise extreme caution if their strategy is to time the market right now.Securities Disclosure: I, Andrew Topf, hold stock in Goldcorp.a Related reading: Gold Spikes $40 as Debt Deal Delays Taper Gold Could Rally in November on Indian Buying from Gold Investing News