By James Turk
There is a popular point of view that the Reserve Bank of India put a “floor” under the gold market around $1050, which approximates the price at which it bought 200 tonnes of gold from the IMF. The thinking is that other central banks, and perhaps the Reserve Bank of India itself, will purchase gold at that price. This theory that $1,050 represents a “floor” is now being put to the test.
Regardless whether this theory proves accurate or not, it is clear from the following chart that gold remains firmly within a major uptrend. Gold also remains above its all-important 200-day moving average.
This long-term price chart of gold is providing us with an important message. The panic selling seen today (Feb. 4th) has hardly put a dent in the bullish picture presented by this chart.
All Things Considered – John’s Commentary: The spot metal pricing may test prices below $1,050. There is a psychological floor at $1,050 and very significant resistance at $1,000. I would be very surprised to see gold close below $1,000 for more than three consecutive days. All this volatility is merely an exchange between strong and weak hands, coupled with ample market manipulation from the likes of JP Morgan, et al.
Action to take now: Continue to accumulate at these prices. I want to again mention my experience when gold was at $400. I can remember when gold went through $300 quickly to $400. I had friends and associates who were waiting for gold to pull back before they bought. Some of those individuals are still waiting. You don’t have to commit your entire allocation today – just keep up the slow and steady. I am seeing more and more of my clients buying a little bit each month or quarter. It has worked out well for them.
What to buy: With the gold:silver ratio at 71:1, continue to favor silver over gold at a two-thirds, one-third ratio in favor of silver. 90% silver coin and 100 oz. silver bars continue to afford the best values. In gold, I currently have excellent pricing on South African Krugerrands.
