Gold Reaches $1,000 Again: This Time It's Different

(Normally, when I see headlines like this, the related article usually starts off complaining about market manipulation being the reason gold has been held down. I usually print those conspiracy articles on nice, soft white paper that I use to clean my *#@ and then file away in my circulating file cabinet. But, this time I generally agree with the reasoning. I believe the recent de-leveraging and the government's recent spending spree . . . er . . . bailouts and stimulus will, among other reasons, be bullish for gold. - A.C. Dwyer)

Last Friday afternoon the spot price of gold in the U.S. reached $1,000. This is only the second time that the gold spot price breached this significant threshold. Although gold may see temporary modest sell-offs before it permanently stays over $1,000, I don't think there will be any more buying opportunities at a significant discount to $1,000.

Here are some of the reasons why.

Last March, when the price of gold topped $1,000 for a few days, the global financial markets in general and those particularly related to gold were much different.

The open interest in the COMEX gold market is now about 40 percent lower than it was last March. That means there are fewer speculative long positions that could be liquidated in short order.

Many hedge funds and other leveraged gold investors have long since liquidated their margin positions. They can no longer sell anywhere near the quantities of gold as they did in 2008.

The number of outstanding shares of GLD, the major gold exchange traded fund, have jumped over 55 percent since last March. This exchange traded fund is selling so many shares that it does not seem possible that it is able to acquire an offsetting amount of physical gold, so much of its new outstanding shares may be covered with gold derivatives.

There are rumors . . .

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