Is The Gold Picture Bullish Or Bearish?

The picture for the gold price is looking more neutral than anything else. Gold is actually trading higher than the average of trading ranges during the past 10 summers. That would mean that gold prices are actually doing better than the average, discounting the bearish case. Most definitely.

If the summer was more like 2008 was, then you could definitely say bearish. And if the summer was like that of 2011, you could definitely say bullish.

Gold has traded sideways during summers more often than not. Last summer was the end of a move, so we have returned to normalized trade in gold. But there is a strong case for a breakout at some time, especially into the fall, and the continuation of the bull market.

Fundamentals such as negative real interest rates, negative nominal rates now on short term deposits, and central bank quantitative easing all make for the bull case. What might seal the fate of gold as money is the changing of gold bullion into an asset to be held by the banking sector as part of their capital asset ratio.

If you sort through the jumble, gold prices are trading similarily to 2005:

source: http://www.safehaven.com/article/26175/pm-summer-doldrums-4

$CDW Gold Weekly

$CDN dollar gold prices for Q1, fiscal 2013 are trading in the range of what is probably the average realized price for fiscal 2012, which ended in April.

It won't take much of an advance to make the case for continuation should prices break out of a lengthy flag formation, or pennant:

supersize: http://www.flickr.com/photos/11747277@N07/7575171100/sizes/l/in/photostream/

http://scharts.co/M09HGl

GBN.V Daily

The thing that continues to perplex me is that GBN.V management seems perfectly content to sit indefinitely on staggering losses in the share price. Surely they will have assessed the losses in the share price as a function of derivatives on commercial trading desks with various banks.

They continue to drill geological test holes and table finances which are a dog's breakfast. If I was a leading award winning geologist, I would not be able to conscience saying that I came up with bupkus in my drill holes after spending a lifetime accumulating an entire gold belt and having a wealth of historical information. If I were the CFO, I would not be able to sign my name to the preposterously absurd approach to company finances.

Surely they can't be so naive as to attempt to withhold information from the shareholders and dilute themselves relentlessly. Surely they haven't missed by now the impossibility of attempting to obtain a share price advance on drill holes or gimmicky schemes to attract attention. The company has now gone way beyond that point. They should be on the verge of overwhelming free cash flow and paying dividends.

By some twist of fate, some lines I happened to arbitrarily draw on the daily chart match up with price points.

supersize: http://www.flickr.com/photos/11747277@N07/7575275538/sizes/l/in/photostream/

http://scharts.co/PWvP9r

-F6