Go Gold Go

Today, gold has risen sharply trading around $674 /oz, up about $10 dollars.

The mystery again is why? Well it's not so much a mystery, but more a very bullish sign and let me tell you why.

The first hypothesis for the gain in gold is that global investors and technical traders around the world read my post yesterday when I said gold was gearing up. I guessing that idea is not the most likely scenario.

After these strong gains I started searching for a strong indication of why gold moved so strongly. For the most part the news was quite bearish for gold. Iran and the U.K. have come to an agreement on the release of the 15 British sailors/soldiers. After that news the price of oil fell sharply, very bearish for gold.

On the bull side, the news is pretty limited. Some poor economic data came out regarding service industry growth and new factory orders. There was also a rise in the price of natural gas. That pushed the USD index down slightly. The news was not significant enough to cause a major move in the stock market as the DOW is up a rather modest 15 points or so. None of this was significant enough to reason a $10 jump in gold

I think this speaks to a more important point that us gold bulls have been waiting for. I believe that gold is starting to act upon its own fundamentals. Gold is grossly undervalued in regards to inflation, and it was a matter of time before the precious metals market starts to show that. Also, I believe that the central banks gold reserves, which are at their lowest levels since 1948, are no longer capable of supplying the market enough to keep the price down. In other words, the supply from central banks is no longer able to keep up with the growing demand.

I am not saying that we won't give back some of these gains tomorrow. But I do expect to see some significant gains in gold/silver in the coming weeks. Remember this is about the time of year last year that we saw huge gains.