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Gold Ready for Take-Off?

July 30, 2012 – The gains in gold last week has investor sentiment up as the CME August gold contract ended the week $35.20, or 2.22 percent, up.

Chartists, analysts, and investors are anticipating great things. Thursday, MarketWatch’s Mike Paulenoff wrote an article asking, “Is gold set to accelerate higher?” David Bannister with Market Trend Forecast asked, “Is gold ready to run to all time highs?”

Martin Pring of iPath DJ-UBS Precious Metals Subindex Total Return ETN noted that some of the quiet action in the precious metals market could suggest a big move currently afoot in the markets. As momentum has gone uncharacteristically flat, and in such a broad manner, Pring sees a likely strong price move.

Sentiment indicators are also suggesting a possible significant event in the making at the current time. The Hulbert Gold Newsletter Indicator gained 12.5 points on Friday though still negative 2.3 points. A correspondent with Bill Murphy’s LeMetropoleCafe reports that the HGNSI has been under 20 percent for 100 days, a record in the index’s history. The previous record, established in 2002, was followed by a 10.9 percent rise in gold in the following two months.

The Commodity Futures Trading Commission releases a weekly analysis of futures trader’s positions. Last week’s report drew the attention of a bullion dealer with Standard Bank. The dealer notes that there are large short positions in Comex gold, added that since 2004 there have been only five times when the size of the Comex gold short positions stood out, again suggesting that something may be afoot in the gold market.

Three of these high short positions were followed by gains of 25 percent, 23 percent, and 36 percent in the gold market respectively. The only exception in the positions was the year of 2008 with its financial woes and subsequent interventions. At that time, gold was stagnant for three months before rising 19 percent.

Major bullion bank HSBC said on Friday that the data from the CTFC showed a 2.3 million ounce decline in net long speculative positions in gold to 13.62 million ounces, leaving room for gold prices to rally on short covering.

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