Where Will The Gold ETF Bottom In This Corrective Cycle?
“Around two months ago I advised my partners to look for gold to drop to the 1040-1070 area in U.S. dollars. This followed my projection in early August of a gold rally from 900 to 1250 before the next top, and I was close as we hit $1,225 and rolled over. This correction so far in gold is normal in a bull market, and is intended to knock everyone off the back of the bull. The bull likes to make sure as few people as possible are along for the ride,” David Banister Reports From StockHouse.
Banister continues to say, “Currently we are seeing a strong counter-trend rally up in the U.S. dollar. Investor’s should keep in mind that the dollar index is simply a mathematical calculation against a basket of other currencies. In this case, 57% of that formula is the Euro. The Euro has had a dramatic correction and is likely to continue to drop due to problems in Greece and other countries. This makes the dollar look better on a relative basis, but investors should remember this is largely cosmetic. Deficits continue to balloon, debt ceilings are raised, and the U.S. Treasury has to rollover a significant amount of Treasury Bonds this calendar year. Traders and investors over-react to the rallying dollar and start selling off gold and silver as fast as they can. However, at some near-term point, gold is likely to firm up and bottom regardless of the dollar rally. There has been no fundamental shift in the U.S. dollar or its merits in my opinion, and in fact, the recent economic events are only making gold look more attractive relative to other world currencies. This pullback is required to work off the excessive optimist we saw in early December.”
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