Yet, the price has gone from 116.17 on December 31, 2013 to 124.43 or an increase of 8.26, some 7%.
What this tells me is that the biggest portion of gains that gold has managed to tack on in this key indicator of Western-based investor gold demand has come from SHORT COVERING, and not from a strong influx of fresh, eager buyers.
No market can sustain any strong advance without a steady, constant steam of fresh buying. Short covering rallies can be quite impressive and can actually flip many technical indicators positive, so they should not be ignored because of the nature of today's computer-based trading programs of the hedge funds.
Also, all true bull markets start with a wave of short covering as the change in sentiment first frightens the bears who have been complacent and riding waves of profits lower as the market descends. Then it attracts some bottom pickers and some opportunistic longs who jump on what they hope is the beginning of a bull freight train leaving the station.
The big question is will this buying become more friendly in the sense that it will consists of more NEW LONGS being put on rather than old shorts being taken off?
Time makes that clear but from a technical standpoint, how the market handles overhead chart resistance levels is key. As more technical levels get violated on the upside, more skeptics commit to the long side. As more skeptics become true believers, sentiment undergoes a shift in which the longs then become complacent and brimming with confidence so that they eagerly buy into each and every dip in price. Let's watch to see what gold will do now that it is nearing a key overhead resistance level, especially in light of the some of the big moves lower in key gold stocks such as Barrick.