Gold to hit $1500 by year-end - Jeffrey Nichols

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A look at what's driving gold now.

Gold bulls are biding their time, waiting for the "cheap money" policies of the first world to explode into inflation. In the short-term a prominent market player believes the fundamentals aren't in the price. Perhaps this is a time to profit.

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Jeffrey Nichols, Managing Director of American Precious Metals Advisors, explained in the Market Review podcast that "I think today if you are talking about today specifically, much of the selling is being done by traders and speculators in New York and in London and the western market centres.

"They are selling gold not because they are necessarily negative on gold in any long-term sense but gold is simply one of the instruments in the constellation of vehicles that they trade along with oil and other things and in the past week or two as gold seemed to run into technical resistance on the upside - some of these traders decided it was time to take profits or take short positions and the trading train moved into reverse and gathered a little momentum.

"At the same time there seemed to be a little less anxiety about the euro. They seemed to have patched over some of the problems of that sovereign risk with Greece and some of the other weaker European economies with debt problems. The dollar rallied a little bit.

"So I think between those two factors, gold began to sell off - much of it being technical selling of futures and derivative products, not really physical sales by investors who have a long-term view of gold. So that's the important thing.

"Also over the last few weeks we saw some pickup in demand from India importantly. In January and February, Indian demand was actually quite strong and as we came into March the Indians took a rest and were waiting for the prices to come back down again before coming back into the market and that may have contributed a little bit too - but the Indians will come back into the market probably in the next few weeks.

"There's a wedding seasonal period that begins in April and there will probably be some seasonal buying around that. But I expect gold to pick up.

"I am still very optimistic about gold during the rest of the year, notwithstanding this current weakness and we will probably see periodic sell offs over the next year or two. I think we are going to see a volatile market around an upward trend.

"That said, by mid-year we will see the historic US dollar high point which was around $1227 and by year end we will be seeing $1500 gold. So you can see I am quite optimistic but with wide swings around that and sell off will lead some to believe that the bull market is over."

Write to Chris Blaine: chris@moneyweb.co.za