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June 27, 2006

Gold: Short Term Gold Outlook-via Video
by Emanuel Balarie

What a difference a month makes. I have been "furiously" trying to find out what has changed in recent weeks.

Are the central banks selling their Gold?

Do we have reasons to believe that the talk about inflation has been blown out of proportion?

Was there a story about a large Gold find that I just happened to miss?

Did the price of gold head higher because hedge funds started buying gold in 2001?

Of course, it is foolish to think that any of the fundamentals that have been driving this bull market have changed. If anything, the fundamental reasons have only intensified.

Inflation concerns, for example, have grown across the board.  The AARP reported that the average wholesale price of prescription drugs rose by 3.9% last quarter, which was four times the rate of inflation. In Germany, producer prices shot up by the highest amount in 24 years. Back in the states, the rental index of the core CPI was up 0.6% in May, the biggest increase in 16 years. Globally, Central Banks are scrambling to raise rates and put a stop to inflation.

Ironically, most Wall Street economists seemed shocked by the recent news of higher than expected core CPI numbers. Ben Bernanke has even stated that the recent rise in the core consumer price index is an "unwelcome" development. Personally, I don't think it was difficult to predict that inflation was going to be a concern. Whether it was the flooding of liquidity or the consistently high energy and raw material costs, it was only a matter of time until the core CPI reflected this. In any event, I expect the core CPI to spike higher and force a data dependent fed to continue raising rates.

If anything, the recent sell off in the gold market has reaffirmed to me that people are still not buying into Gold as a legitimate asset class. In the last several weeks, I have had conversations with self-proclaimed Gold Bulls that decided to sell their gold coins during this recent sell off. Although it was quite obvious that there were a good amount of speculators and technical buyers that had entered the market within recent months, I was surprised at how many people panicked during this recent sell-off. In truth, shaking lose the speculators was healthy for the overall direction of the Gold market.

So where do we go from here? The long term outlook remains the same. Gold prices will continue marching towards $1000 plus. I also believe that we will see new recent highs before the year is over. In the short term, John Carter of tradethemarkets.com was kind enough to put together a short 8 minute video presentation on the technical outlook for Gold.

As a reminder, the risk of loss in trading commodity futures contracts can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. Also, the opinions expressed in the video are solely of John Carter and Tradethemarkets.com. http://www.tradethemarkets.com/video/gold/gold.html

Emanuel Balarie
CommodityNewsCenter.com

Emanuel Balarie is the Editor of Commodity News Center and the author of the highly acclaimed book, Commodities For Every Portfolio: How You Can Profit From The Long-Term Commodity Boom.

Mr. Balarie's industry experience ranges from commodity stocks to futures to alternative investments. He is a highly regarded advisor to clients and institutions on the commodity markets and managed futures investments, and has had his research published all over the world. In addition to his several CNBC appearences, Balarie is frequently quoted in financial publications such as The Wall Street Journal, Reuters, Marketwatch and Barron's.

Mr. Balarie was one of the few market strategist to correctly predict this multi-year bull market in commodities, the decline in the US dollar, and the downturn in housing.

The risk of loss in trading commodity futures contracts can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition.

Copyright © 2005-2008 Emanuel Balarie

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