Gold broke out with force last week from its wedge formation. You may wonder what happened, what caused the sudden outburst in gold? Inflation fears? Dollar collapse? Safe haven play? In my piece 'Last chance to buy gold below $1000' I made the case for a break-out to the upside hwich would lead to a $1000 handle on gold soon. Let's first take a peek at the gold chart from my editorial 'Last Chance to buy gold below $1000?' published on Sept 2, 2009 and see what happened next:
TGDR Gold Chart - Daily September 01, 2009
Well, we said that a close above $960 would clear the way to $1000 in short term and that's exactly what happened indeed, see updated chart below:
TGDR Gold Chart - Daily September 14, 2009
So $1000, what next?
The weekly chart below show the $1000 - $1030 resistance area which needs to be taken out. How long it will take? Well, good question. The commercial short players have digged in themselves like never shown before in history. The record high short positions are telling us they don't want to see gold above $1000. Their worst nightmare however are the Chinese and an ever increasing amount of investors stepping up the plate buying gold hand over fist, see also Last Chance to buy gold below $1000?..
TGDR Gold Chart - Weekly September 14, 2009
Could a commercial signal failure be in the making here? Are we on the verge of a spectacular historical move in gold? We will know the answer within days. Some wild swings are in the pipe-line since record high commercial shorts vs record high spec longs can't be solved without violent spikes up or down. In 2005 we had a commercial signal failure which send the commercials running for the hills thereby launching gold from $430 to $730 in short order. We could be very well on a similar juncture here right now.
Investors betting on the commercial shorts since they come out as winners most of the time please note that the massive short position they have accumulated has been accumulated when the Central Banks have become net buyers, when Barrick Gold rushes to cover its 6 B$ short position, when China has said it has lost confidence in the dollar and will buy dips in the gold price, when the Middle East and India crank up into high demand gear, when the Chinese government has encouraged its citizens to buy gold and silver, when South African mine supply has again declined by 7.8% y-o-y., when investors such as Greenlight Capital are switching from GLD to real bullion etc etc. Now even a chimpanzee could recognize the vulnerability of the massive short position here so betting on them (commercial shorts) could very well be proven wrong coming weeks.. Again, it did happen before. In 2005 the commerial shorts were forced to cover thereby launching the gold price from $430 to $730 in short order.