Top Gold Forecasters See Rally Until March

The most accurate forecasters say gold will rebound from its biggest monthly plunge since 2008 and reach a record by March because economic growth is stagnating and Europe’s debt crisis is unresolved.

Futures traded in New York may rise 13 percent to $1,950 an ounce by the end of the first quarter, according to the median of estimates compiled by Bloomberg. The predictions are from eight of the top 10 analysts tracked by Bloomberg over the past eight quarters. Two declined to give forecasts.

Holdings in exchange-traded products backed by bullion rose the most in three months in October, and the most-widely held option gives owners the right to buy gold at $2,000 by Nov. 22. Demand for the metal accelerated since May as slowing growth and mounting concern that European leaders will fail to contain the region’s debt crisis caused $7.5 trillion to be erased from the value of global equities.

“There is a loss of trust in the entire financial system and urgent need for safe-haven investment,” said Ronald Stoeferle at Erste Group Bank AG in Vienna, the second most- accurate forecaster in the past three months. “The environment for gold is just perfect.”

ETP holdings expanded 1 percent to 2,271.2 metric tons last month, a pile now valued at $126.6 billion and greater than the reserves of all but four central banks, data compiled by Bloomberg show. Bullion bought for investment accounted for 38 percent of total demand in 2010, compared with about 4 percent a decade earlier, the London-based World Gold Council estimates.
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More: http://www.bloomberg.com/news/2011-...-rallying-to-record-by-march-commodities.html

Some good info in the article about investment demand.

Gold traders are the most bullish in three weeks after hedge funds boosted their wagers on higher prices on speculation Europe’s debt crisis and slow U.S. growth will spur demand for the metal as a protection of wealth.

Twenty-eight of 32 people surveyed by Bloomberg expect bullion to rise on the Comex in New York next week, the most since Oct. 14 and the second increase in a row. Money managers boosted their combined net-long position in New York gold by 8.7 percent in the week to Oct. 25, U.S. government data show. ...
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“The conditions are perfect” for gold, said Mark O’Byrne, the Dublin-based executive director of GoldCore Ltd., a brokerage that offers investors quarter-ounce British Sovereigns up to 400-ounce gold bars. “We have unprecedented levels of risk in markets. We still have ultra-loose monetary policy and the debasing of currencies. That’s obviously bullish for gold.”
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More: http://www.bloomberg.com/news/2011-...bt-crisis-u-s-economy-spur-bets-on-gains.html

:agree: However...

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The last time traders and analysts were this bullish, prices dropped 2.8 percent the following week. Gold slumped as much as 20 percent in the three weeks after setting a record $1,923.70 on Sept. 6 as some investors sold the metal to cover losses in other markets. Global stocks are down 4.1 percent so far this week.

“Weakness in equities can and perhaps may ignite selling in gold as margin calls once again return to the fore,” economist Dennis Gartman wrote in his Suffolk, Virginia-based Gartman Letter yesterday. “We are cognizant of the fact that several very large hedge funds holding both gold and equities are always on the edge of being forced to liquidate. Should equities continue to falter, gold shall follow.”

While bullion may climb to $1,800 by the end of this month, the metal may then plunge to as low $1,000 by May, according to John Taylor, founder of FX Concepts LLC, the world’s largest currency hedge fund. Still, a drop to that level would be a “big buy,” Taylor, who in July correctly predicted that gold would reach $1,900 by October, said Oct. 19.
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I also see this as a real possibility if the Euro implodes. I'm holding tight right now as I expect there may be a significant buying opportunity ahead (assuming dealers will actually sell physical metal should the bottom fall out of the markets).

Gold rose for a second straight day in New York on increased demand for an alternative asset as concern mounts that European leaders will be unable to contain the region’s debt crisis.

Italian Prime Minister Silvio Berlusconi won a vote today in parliament on last year’s budget report, even as he failed to muster an absolute majority. Federal Reserve Chairman Ben S. Bernanke signaled more monetary stimulus may be needed to cut unemployment, while the European Central Bank last week unexpectedly lowered interest rates. Gold has rallied more than 10 percent since the end of September.

“The turmoil in Europe has brought the fear trade back to gold,” Lance Roberts, the chief strategist and chief executive officer of Houston-based Streettalk Advisors, said in a telephone interview. “Also, a renewed wave of policy easing by central banks is helping gold.”
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More: http://www.bloomberg.com/news/2011-...six-week-high-spurs-selling-by-investors.html

Anyone here think the Euro debt crisis is ever going to be effectively "contained"?

It will be contained once Europe decides to monetize debt

Gold traders and analysts are the most bullish in at least seven years as investors accumulate metal at the fastest pace since August to protect their wealth from a widening European debt crisis.

Twenty-one of 22 surveyed by Bloomberg expect bullion to rise on the Comex in New York next week, the third consecutive increase and the highest proportion in data going back to April 2004. Holdings in exchange-traded products backed by gold rose 27.5 metric tons this week, within 1 percent of the record set almost three months ago, data compiled by Bloomberg show.
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The gold survey has forecast prices accurately in 223 of 387 weeks, or 58 percent of the time.
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More: http://www.bloomberg.com/news/2011-...004-on-deepening-debt-crisis-commodities.html

As a professional trader (I have to kill it to have food to eat), yes, when too many are bullish, it's a bad sign. But not always, just often. The theory is that when everyone is "all in there's no more buying and the first seller trips an avalanche. It does happen.

On the other hand, it can also be everyone's bullish for darn good reasons, and in this case trying to protect themselves from unknown but probably bad things yet to happen...And that can go on a looong time - it's the old buy the rumor, sell the news. Still plenty of rumors, and when good things break out, there's rarely big headline news, things just gradually get better and the level of whining and worry slowly creep down...

I just hope they are right. On top of a decent stack here, I'm super long in gold (paper) right now, and these gaps between when I can trade it are kind of scary...:shrug:

All that said, when I put on my TA/chartist hat, things look pretty good just now. We might bounce off 1900 again, but it surely looks good for getting there.

I like this site: http://quotes.ino.com/chart/?s=FOREX_XAUUSDO for a number of reasons. Look at a year chart...after that crazy drop (margin calls?) we're back on trend with some minor (buy the dip? Dunno but I have.) pullbacks. I note that while most of my other links don't get the updates when Asia opens on Sunday eve, this one does. Lookin' good right this moment (10:20 pm my time EST). $1793 and change.