GATA Chairman Bill Murphy's "Midas" commentaries at www.LeMetropoleCafe.com have been shouting for weeks that the physical gold market is overcoming the paper market. Below is an unusually detailed dispatch tonight from OsterDowJones that gets a bullion bank official to acknowledge as much.
CHRIS POWELL, Secretary/Treasurer Gold Anti-Trust Action Committee Inc.
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By Gavin Maguire http://www.futuresource.com/news/news.asp?story=i4385249205226897472
NEW YORK, Aug. 27 (OsterDowJones) -- Gold futures on the Comex division of the New York Mercantile Exchange jumped $7.30, or 2%, Wednesday to their highest level in three months on bullion bank and speculative buying sparked by the surpassing of recent resistance levels that brightened gold's technical picture.
The most-active December contract settled $7.30 higher at $374.10 per ounce.
Trading got off to a brisk start as a number of major bullion banks sought to bulldoze prices through layers of overhead resistance in place around $368-$370. This marked the location of a downtrend line that has capped prices on numerous occasions since the 2003 high in prices around $387.50 basis the December contract, scaled in February.
The $370 area capped prices on a run higher in July, and prices have remained below that level since.
However, in recent days speculative and bullion bank buying have persisted in keeping gold within touching distance of that region -- despite a fairly robust performance of late by the U.S. dollar.
Dollar-denominated gold traditionally comes under pressure during times of U.S. dollar strength. But in recent weeks buyers of gold have ignored the currency markets in favor of focusing on the overhead targets as geopolitical tensions heightened and gold's allure as a safe-haven asset was augmented.
The early bullion bank buying was designed to poke prices through the nearby resistance and activate pre-placed resting buy orders lurking just beyond that would spark a flurry of automatic buying.
The ploy worked within the first 15 minutes of trading. December futures burst from the $368.50 level to $373 within two minutes just after 0830 ET (1230 GMT) on a frenzy of fresh buying and short covering (the buying of positions previously sold).
The break above the established trendline resistance then drew chart-following funds attracted by the bullish implications of the breakout as well as by the positive momentum in prices.
Ian MacDonald, manager of precious metals at Commerzbank in New York, noted that along with the breach of resistance a flurry of options-related buying was also evident to ensure the buy orders emerged from all corners of the market.
He expected more buying to emerge in the coming days following the strong technical close. Immediate upside targets include $377, $380 and $382.
But MacDonald also allowed for some profit taking to hit the market ahead of the forthcoming long weekend for Labor Day.
"It's safe to assume this market won't go up in a straight line, so some profit taking is very possible."
However, he added that as physical and speculative buying have been so sturdy of late, the upside remains gold's longer-term path of least resistance.
"We're seeing more and more interest in gold from all over. We're getting good physical demand out of India and the Middle and Far East, as well as from U.S. investment funds, so we're in a bull market," MacDonald said.
"I see $400 on the radar over the next few months, but as I said, we're not going up in a straight line so it might take a few attempts."
Other sources said any nearer-term retreats would likely find support around $370 initially and then around $367-$368.
The same outlook applies to spot metal, which also hit three-month highs of $374.20. Nearby upside targets include $375-$376, $380 and $382, dealers said. Support is expected around $370, $367-$368 and $365 initially.
December silver was buoyed by gold's strong showing and gained 13 cents on the day to settle at $5.156. As with gold, some further upside progress is deemed possible, but resistance is touted around $5.17, $5.20 and $5.22 over the near term.
Nymex October platinum also saw speculative buying spurred by the strength seen elsewhere. October settled $19 higher at $713.70, a contract high. With prices on the spot market scaling highs not seen in more than 20 years, dealers were reluctant to pick a top. But they predicted that at least some profit taking could be expected around $720, $725 and $730 should any further buying be seen.
September palladium, meanwhile, was largely ignored during the excitement elsewhere and wilted $1 on the day to settle at $205.50.
Dealers said the bullish noises emitted elsewhere in the complex will likely limit selling pressure over the short term. But the upside is also viewed as fairly limited by profit takers deemed lurking ahead of the $210 level.
