Gold Prices Bound To Fall Further

[Dover]

Look for gold at $1662 an ounce to continue its retreat tomorrow in the wake of last week’s rout and the coup de grace of another rise in margin on gold futures speculation at the commodity exchanges.

As gold began the year at $1400 an ounce and rose spectacularly to almost $1900 an ounce– a run-up of $500 or about 35%– there are evidently plenty of margin buyers who got in the game between $1400 and $1662 who are feeling edgy about getting margin calls just at the very moment Europe is in a swoon, and the stock markets everywhere are under great pressure. The next impact point is $1522- the 200 day moving average on gold prices. We’re in retreat for the time being.

Then, too, the dollar has rallied a bit, but is still below its high for 2011, suggesting that if the euro is under pressure, the offsetting trade will be to buy dollars. As I have written many times there is an inverse relationship between gold and the dollar. When the dollar is weak, gold as an alternative currency is strong. But, when the dollar is strong, gold appears to weaken– at least roughly 70% of the time. You should keep that in mind.

...cont'd

http://www.forbes.com/sites/robertlenzner/2011/09/25/gold-prices-bound-to-fall-further/