DENVER, CO--Forward month gold prices took a small step back this morning but held strong over the $800 level with a reeling US dollar and positive fundamentals expected to pushed the precious yellow metal toward new record highs.
Gold for December delivery fell $0.80 to $807.7 an ounce on NYMEX as of 11:49am Eastern Time. The yellow metal slipped throughout the morning as traders looked to cash in following the metal's surge in the previous session.
Gold rose $14.80, or 2.3%, on Friday to finish at $808.50 an ounce on NYMEX. Earlier in that session, the contract hit an intraday high of $811.00, a level not seen since 1980. The record high for NYMEX gold was $850 set back in January 1980.
In the short-term gold appears to be slightly overbought and we may continue to see a bit of consolidation. However, the massive gold short positions are exposed to losses tallying in the billions of dollars.I expect that these shorts will take the opportunity to close their positions on any dip in the gold price, which will be very supportive of gold.
The long-term underlying trend remains incredibly bullish. The ailing dollar, near record oil prices and the developing and deepening housing and credit crisis are all supporting the surging gold price.
Crude prices are nearing the $100 per barrel level while the US dollar continues to sink below all-time lows.
Bottom line: Gold prices are showing no signs of looking back. The fundamentals leave little room for interpretation. Supply problems have emerged, speculative demand is in the surge, oil is showing no signs of cooling and the dollar is bombarded by the subprime mortgage/credit crisis.
It is certainly a question of when, not if, we get to $850. However, there seems to be nothing on the immediate horizon to generate the fresh momentum needed to hurdle the record level.
The yellow metal will continue to be moved ahead with an increase in oil prices. A third week of sharp declines in US oil stocks on Wednesday could be sufficient to push oil over $100 per barrel and give gold another boost at the same time.
As always, stay strong and stay long gold,
Greg McCoach
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