When gold passes (and holds) $US 1000 it will be interesting to compare the situation to what happened when gold passed the psychologically important $500 level in late 2005. Back then the commercial short position and Market Vane bullish sentiment were remarkably similar to the levels they are now. Instead of adding to their short positions however, commercials covered on the run up from $460 to $725 in May 2006. Perhaps they will do the same again.
Even more interesting will be what happens to PM stocks if the gold run over $1000 coincides with a falling DOW. Maybe PM stocks will decouple from the general market. This is what happened throughout 2001, 2002 and into early 2003 with the DOW in a clear down-trend and the HUI increasing 300-400%.
$1000 is such a HUGE psychological barrier that will gain attention everywhere (see chart below courtesy of Bob Howe). Maybe overcoming this hurdle is what will decouple PM stocks from the main market again. Fascinating times ahead of us, that’s for sure.
