Short Term Gold Forecast

A Chance to Break Above Old Highs

March 19, 2011 Update

Timing cannot better for gold to make a new high as it carries good fundamentals. There are three strong forces behind rising gold prices at the moment:

Middle East and N Africa

Japan has grabbed the investor’s attention and news headlines recently but the social unrest in the Middle East is still on and it is getting uglier. At least 40 people have been killed, and 200 wounded, as security forces in Yemen launched a bloody crackdown on protesters.

Saudi King fearing people’s uprising will announce the replacement of several government ministers, an anti-corruption drive, and an increase in food subsidies.

As for Libya, it can be more messed up if UN starts a military strike. Increasing global uncertainty is bullish for gold.

Currency Intervention

G7 had to step in and intervene in the currency market to make sure Japan’s Yen does not appreciate. This is another example of governments and central banks controlling and manipulating the value of the paper currencies, bullish for gold as it represents a reliable means for store of wealth.

Falling dollar

Green back has been on a steady downtrend and has broke below its 52 week low. If dollar keeps the downtrend both the yellow metal and stock market will enjoy a nice ride up.

Gold stocks are lagging the gold price and this can be a good opportunity for them to catch up. Both GDX and GDXJ have formed the foundation for a steep rise.