In recent days, DB and GS have downgraded gold with GS calling for 2014 year end price of $1270. Before my recent semi-positive view on gold, I was looking for a pullback to the $1250-!300 area before being a buyer. However with increased M2 and stepped up QE by the BOJ, I became a buyer of a couple gold stocks-ABX and GG-in recent days.
I haven't figured out DB and GS reasoning-either technical or fundamental-but one fundamental is bullish in my mind. The supply of paper currencies is and will be increasing faster than the supply of gold. With large gold deposits hard to find, ABX's Chile mine is encountering environmental problems with construction halted-chances are the % growth in paper currencies will widen vs the increase in gold supply. That suggests to me, that gold will rise in price against all these currencies because of its relative scarcity.
Other than the DB and GS downgrade, gold may see downside pressure from the announcement that Cyprus will sell about $525 million in gold as part of their bailout. Once that supply is absorbed and the downgrades from DB and GS fade into history, I would expect gold to grind higher. In the interim, I will look to buy other miners, that pay decent dividends, as the bottoming process of gold gets near completion. Ultimately, I expect $2500-$3000/oz.
Because the next two NG reports, 4/10 and 4/17 are going to be bullish, a run to $4.30-$4.50 is possible. If so, then I'm going to take profits on some NG positions. Then, over the course of May/June, looking for a pullback to $3.60 or so.