Austrians
Gold to $1,500
http://www.gloomboomdoom.com/marketcommentary/download/CONT_2007_1101_goforgold.pdf



GOLD
when a trend change eventually occurs it will be followed by a substantial decline.

As an aside, the commercial net-short position in the gold market is mostly offset by a net-long position of around 120,000 contracts accumulated by large speculators.

Now, the reason that it is generally not possible to squeeze the Commercials is because their positions in the futures market are usually just a hedge against their positions in the cash (physical) market. However, at the present time it is extremely unlikely that the Commercials have 12M ounces of physical gold at their disposal, so what happens if the large speculators that have built up the 12M ounce net-long position decide to demand delivery of the gold? In this case the Commercials would either have to step into the market to buy the gold or get bailed out by central banks. The point is; if the large speculators are well financed and have a lot of conviction then they, not the commercials, have the upper hand because they have the ability to demand delivery. The large specs might have no intention of demanding delivery but we would certainly not want to be short gold right now.

111 is a price level that acted as support on the way down and should therefore now act as resistance on the way back up, so it wouldn't be surprising to see the euro pause for breath for 1-3 days before resuming its ascent.


We expect the Dollar Index to drop to long-term support at around 80 within the next 6 months, but regardless of what is happening in the world at the time there are a few good reasons to expect that a substantial and lengthy rebound will begin from near this major support level.

First, in order for the Dollar Index to drop to 80 the euro will have to move up to 125-130 and the number of Yen per US$ would need to drop to 95-100. These levels for the euro and the Yen would be perceived by European and Japanese policy-makers as being major problems for their respective economies. Also, the possibility of the Dollar dropping below long-term support would be perceived by US policy-makers as a major risk. As such, aggressive and coordinated action by the world's senior central banks to support the US$ is likely to occur once the Dollar Index gets near 80.

Note, though, that the expected drop in the Dollar Index to 80 will not eliminate the massive current account deficit being run by the US and therefore the 80 level isn't likely to be the ultimate bottom.

Third, the weaker dollar will boost the earnings of many multi-national US corporations and this, combined with the anticipation of aggressive central bank intervention as the 80 level is approached, is likely to stimulate foreign investment demand for large-cap US stocks. This will particularly be the case if the US stock indices are trading at much lower levels at the time.

Last week's downward reversal in the Dollar Index might turn out to be the first step in its decline to a new bear market low, but at this stage we can't eliminate the possibility that there will be one final up-move before a major decline gets started. If there was one final surge, either immediately or following a pullback, we expect that it would terminate at resistance in the 102-104 range.

Below is a daily chart of December gold futures. By closing above its May-2003 peak at the end of last week gold provided us with another piece of evidence that it will trade above $400 within the next couple of months.
posted by Dil at 11:27 AM