By Barry Stuppler - MintStateGold.com
After increasing six days in a row, and up over $300 in the past month, Gold finally saw some profit taking last night. After breaking above the psychological resistance level of $1,900, gold reached $1,912.60 in Asian overnight trading. At that point, light profit taking hit the market driving gold down to $1,848 before substantial buying appeared. At 11am PDT, Gold is trading at $1,862.20 per ounce, down $25.60 from yesterday.
For the continued health of the gold market, I would like to see gold trade in the $1,800 to $1,900 area for the balance of August to build the base. Historically, September and October have been high demand months for gold, so the rally should move toward $2000.
Much of the Gold, Silver, and Platinum rally is based on optimism over a possible QE3 announcement by Federal Reserve Chief Bernanke on Friday Aug. 26th. Commentator Dennis Gartman said, "Bernanke has had a short history of using the Jackson Hole meeting to announce changes in policy and/or to make important statements regarding the Fed’s policies that he would prefer putting into effect,"
CNBC Mad Money host, Jim Cramer, stated that he feels gold is a currency, not a bubble, and it needs to be owned by investors.
The Shanghai Gold Exchange (SGE) said on Tuesday that it will raise trading margins on three gold spot-deferred contracts from 11 percent to 12 percent starting Aug. 26 to limit trading risks following recent wild price swings. It would also widen daily trading limits for those contracts to 9 percent, up from 7 percent.
Silver tracked gold’s price movement, hitting a high of $44.27 in active trading and falling back to $41.94 at one point. Silver is trading $42.28 per ounce at 11am PDT, down $1.31 from yesterday at the same time. Remember, inflation is the key to higher silver prices, and worldwide commodity and food inflation is still an issue with Corn now trading at a 10 year high.
Other Important news that affects precious metal prices:
Purchases of new homes in the U.S. fell for the third straight month in July, the Commerce Department estimated Tuesday. New home sales fell 0.7% to a seasonally adjusted annual rate of 298,000. The drop was a surprise to analysts. The consensus forecast of economists surveyed looked for new home sales to rise 1% to 315,000.