Agoracom Blog

Gold Oversold but Trend Improving

Posted by AGORACOM at 1:49 PM on Monday, July 15th, 2013

The paper market can control the price of gold for the short term, but over the long term supply and demand moves the market.

I’ve seen this movie before, when the market whether in a bullish rally or bearish correction over does it in either direction. Usually you can find the culprit of these moves to the extremes in the paper market, with the crowd of paper traders piling into a trend.

But you can always tell it is overdone on the downside when the price gets close to the average cost of producing gold, which is where we are now.

I can see lots of evidence in the supply chain that suggests the price is overdone on the downside, at average costs of production, mining head grades dropping, less exploration, not enough new discoveries and new development to replace what is mined every year.

There is also evidence in the technical indicators that the pullback in the price of gold is finished and the trend is entering a more bullish trend. We hit the bottom at $1200, it bounced off that and the next pullback didn’t test that low. It looks like we are now in an improving trend and I expect to see us continue to have higher lows and higher highs.

The market got to the extreme on the downside, and the high quality gold stocks got decimated. Gold in the ground is tremendously cheap right now.

High quality gold stocks are a contrary investors dream.

Allan Barry Laboucan
Chief Market Commentator
Founder, Editor, Host
Allan Barry Reports

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