Gold Price “Close to a Big Breakout”

GOLD PRICE NEWS – The gold price dipped $7.24 to $1,717.67 per ounce Thursday morning after European policymakers announced a comprehensive bailout plan that involves increasing the European Financial Stability Fund (EFSF) to €1.4 trillion and a 50% haircut on Greek sovereign debt.  While the price of gold moved modestly lower, the broader equity and commodity markets surged higher.  The euro currency turned sharply higher as well, rallying by 1.6% to 1.4129 against the U.S. dollar

On Wednesday the gold price advanced $14.93, or 0.9%, to a five-week high of $1,720.10 per ounce.  Silver prices rose alongside the price of gold, by $0.15, or 0.5%, to $33.42 per ounce.  With yesterday’s advance, the price of gold and silver extended their respective weekly gains to 5.3% and 7.5% – putting each metal on pace for its best week since August 15-19.

The rally in precious metals helped lift the Philadelphia Gold & Silver Index (XAU), comprised of many of the world’s largest gold and silver producers.  The XAU added 1.1% to 197.66, bringing its weekly gain to 6.9%.  Among gold mining companies, Gold Fields (GFI) and Randgold Resources (GOLD) climbed 1.9% and 1.2%, respectively.  Silver Wheaton (SLW) rallied 3.7% to $33.40 per share, while Silver Standard Resources (SSRI) jumped 5.2% to $18.98 per share.

Long-time gold bull John Hathaway presented his outlook for the gold price yesterday in an interview with King World News.  Hathaway, who runs the Tocqueville Gold Fund, characterized the recent gold price rebound by saying that “To me we have had our correction, shook out a lot of people and now there is sellers remorse.  Now those people are not able to get back in except by paying a higher price, so this is classic bull market action.”

Hathaway went on to question the soundness of two of the world’s leading fiat currencies.  “Who wants to hold euros?  And if the US starts to intervene through some form of central bank asset purchases, lines of credit, whatever it is they use, nobody is going to want to hold the dollar either.”

The Tocqueville Gold Fund manager later noted that the significant decline in gold sentiment in recent months has helped create a particularly bullish environment for the gold price, from a contrarian perspective.  “The fact that sentiment is so bad right now in gold and silver is just great, it’s really what you want.  We had a complete liquidation of the COMEX longs and sentiment was terrible two weeks ago.  Here we are now and everybody who has been faked out or forced out of their longs, and has maybe even gotten short, is now just wondering what to do.”

As for gold equities, Hathaway stated that “With gold in a re-surging mode and quarterly earnings about to be reported, I think suddenly investors will think, ‘Maybe $1,700 gold is the norm?  Maybe these companies are too cheap?’  With everything else going down the tubes, people are going to look for answers.”  Hathaway did not discuss specific gold companies, however.

Although Hathaway also did not provide a specific gold price target, he predicted that “We potentially have nothing but air to the upside in gold.  We could see a big number on gold before the end of the year.  Nobody is going to want these paper currencies going forward.  That’s kind of where we are now, we’re close to a big breakout.”