The Bullish Case For Gold: Indicators Suggest Gold Has Laid the Groundwork for a Substantial Rally

For those who care about gold such as myself, in the just released CFTC data for the week ended Tuesday, speculators went net short for the first time since December 2001 when gold was priced at $275 an ounce. It’s tough to find a more contrarian indicator.

Peter Boockvar

The one thing that gives me pause is the current interest rate actions by the Fed. They *could* delay the rally until it become overwhelmingly inevitable.

Timing is primarily an issue for those who are trading with leverage and for short term profits.

The Dow/Gold ratio is now back to pre-crisis levels.

As compared to 2002, the 'free float' of gold is tighter now, and central banks are net buyers rather than sellers.  Physical gold may be more of an issue than normal, as opposed to the unwinding of paper positions after a multi-year price manipulation.

At this point one might 'get right and sit tight' in the usual measured way, and wait for the banquet of consequences to be served.

And finally, the gold/silver ratio is now at a recent high.   It may go a little higher, especially in the event of a currency crisis.

This suggest that IF gold rallies, then eventually silver will kick in with a vengeance and provide some outsized gains.   But if the gold rally is a result of a crisis, silver may lag, and perhaps substantially.  If it is in reaction to inflation, they get ready for a ride on the silver rocket.