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Monday, February 11, 2008

Gold, The Dollar, and Flying Pigs

Many of you might be thinking: Sean will be bullish on gold until pigs fly. Well, check out the window, because in the short-term, I'm not bullish on gold ... In fact, I think gold is going to head lower soon. Due to powerful fundamentals, this should be a short-term correction, and a buying opportunity for gold mining stocks.

Be aware: perversely, we may not get that buying opportunity. Gold equities have underperformed the metal, so many of them are crammed with value. They could even trade sideways or go up as gold goes down (unlikely, but the potential exists).

So let's look at the charts ...

What is weighing on gold? Strength in the US dollar, which looks ready to bounce …

I’d expect a bounce to 80 or so – a big move for a currency.

I’m looking at weekly charts, so this doesn’t indicate all this is going to happen today or tomorrow. But unless your time frames are longer term, consider if you want to exit short-term positions in gold by selling into strength.

And remember, if we do get a pullback, it will be a great buying opportunity for many investors. The long-term fundamentals for gold, which I talked about in a recent piece for, haven't changed. And my target for gold this year remains above $1,000 an ounce.

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