From the September 01, 2011 issue of Futures Magazine • Subscribe!

Gold plays role of fear barometer

Hot Commodities

Gold has enjoyed a long bull-run with near daily headlines recently about record high prices. As administrators and regulators are attempting to ease fear in the marketplace, analysts are running to keep up with the yellow metal.

Keith Springer, president of Springer Financial Advisors, says fear has had the greatest impact on gold prices recently. “Gold is a place for people to go as the third currency and it’s also the place for fear. The cataclysmic possibility makes people go to gold, not the fact that we go into a slight recession, but the chance it could be worse than the last time is driving people there,” he says. Springer went on to say traders should watch for continued weakness in the economy as well as any talks of a third round of quantitative easing coming from the Fed, especially paying attention to Fed Chairman Ben Bernanke’s Jackson Hole, Wyo. speech later this week. Springer says support is at $1,600 and resistance is at $1,950-$2,000 simply because those are psychological numbers.

Tom Winmill, portfolio manager at Midas Funds, agrees that fear has played a primary role in gold’s recent advances. He also says to watch economic reports for a read on the economy and how that may affect gold prices. “Gold prices are starting to show weakness and there’s probably going to be more of that if economic reports come out that are positive. Any improvement in the employment picture or statistics that show growth is coming back into the economy will be very negative for gold,” he says. While Winmill did not give specific support or resistance levels, he says he expects gold to be at $1,750 by yearend.

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