Short-Term Gold

Gold has benefited from worries that Greece’s debt crisis is just the beginning of a contagion that may spread through Western Europe’s ailing economies and possibly even threaten the viability of the euro.

And on top of that, the head of the Philly Fed was talking up the medium-term inflation risk today, and reports from around the world – from Australia to China to Brazil to emerging Europe – show rising inflationary pressures. This, of course, also tends to be good for gold.

The smart folk at Institutional Advisors in Vancouver took a look at the technicals and applied some history. Here’s their view, with their chart:

Targets based upon the 1980 to 2007 consolidation continue to point to levels above $2,000. In the short term, the mid-March bottom suggested strength would be see through late May or early June… The pullback to test the breakout of $1,160 on May 4 and 5 alleviated the “urgency,” leaving the market free to rally once again. Upside targets for the next few weeks start at $1,236, with the most common advance being 19% ($1,290) from mid-March, but surprises could be to the upside…

The Globe and Mail in Toronto put together a good visual (below) on how financially exposed the larger and stronger economies of Western Europe are to the region’s teetering nations. Think of all the turmoil caused by Greece – the external debt load of Spain and Ireland together is more than eight times greater.

Some analysts have said that euro weakness is usually not a positive for gold, but the specific fears created by the debt crisis make gold more attractive to many investors as a safe haven even at prices near $1,200 per ounce.

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About Frank Holmes 282 Articles

Affiliation: U.S. Global Investors

Frank Holmes is CEO and chief investment officer of U.S. Global Investors, Inc., which manages a diversified family of mutual funds and hedge funds specializing in natural resources, emerging markets and infrastructure.

The company’s funds have earned more than two dozen Lipper Fund Awards and certificates since 2000. The Global Resources Fund (PSPFX) was Lipper’s top-performing global natural resources fund in 2010. In 2009, the World Precious Minerals Fund (UNWPX) was Lipper’s top-performing gold fund, the second time in four years for that achievement. In addition, both funds received 2007 and 2008 Lipper Fund Awards as the best overall funds in their respective categories.

Mr. Holmes was 2006 mining fund manager of the year for Mining Journal, a leading publication for the global resources industry, and he is co-author of “The Goldwatcher: Demystifying Gold Investing.”

He is also an advisor to the International Crisis Group, which works to resolve global conflict, and the William J. Clinton Foundation on sustainable development in nations with resource-based economies.

Mr. Holmes is a much-sought-after conference speaker and a regular commentator on financial television. He has been profiled by Fortune, Barron’s, The Financial Times and other publications.

Visit: U.S. Global Investors

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