Gold tops $1,315 on "evidence of a dollar breakdown" - Wealth Managers

Continuing stock weakness could spark renewed flight into quality -- and gold

Gold was on the offensive early Friday, topping $1,315 after its surprise 2% surge Thursday powered by strong Chinese trade data, a weakening dollar, and a rise in weekly jobless claims. In contrast, the major stock indexes were in the red Friday, led by the Dow, which was off by more than 100 points.
Platinum also gained the most in more than 13 months Thursday after exports rebounded in Germany and China, while a labor dispute threatened to disrupt mine output in South Africa, the world's biggest supplier.
"It looks like things in China are moving into the right direction, so that means deflationary forces are brushed aside and inflationary forces are more popular now," said Axel Merk of Merk Funds. Added Jason Rotman of Lido Isle Advisors: "China is the 800-pound gorilla in the room from a commodities standpoint."

"Both gold and silver broke their short-term downtrends, which we interpret as a sign of growing investor interest,"Commerzbank analysts said, referring to Thursday's gains."It would help the prices to bottom out if both metals could stay above the psychologically important thresholds of $1,300 and $20 per troy ounce respectively as the week closes." 
"Evidence of a dollar breakdown"
"The continued weakness in the dollar is making gold look attractive," FuturePath trader Frank Lesh said. "Also, there is some buying in anticipation of a rise in retail Chinese demand as the economy improves." 

"You got the dollar index down. ... That's definitely going to help out the metals, and it's helping, actually, most of the commodities across the board," said Phil Streible, senior commodities broker at RJO Futures.
"I'm personally long gold now," Todd Gordon ofTradingAnalysis.com told CNBC. "Gold is I think rallying because ... you're starting to see evidence of a dollar breakdown which I think would finally free that gold market up."
Gold watchers growing optimistic
Gold's recent firming action has inspired some bullish sentiment. The metal could "possibly" hit $1,500 in the "near term,"  Manoj Ladwa of TJM Partnership told Bloomberg. 

And Andrew Su of Compass Global told CNBC that "a floor is beginning to develop around $1,280," with a push through "$1,350 coming "very shortly."
Jeffrey Christian of CPM Group sees gold prices relatively rangebound up to $1,550 for the next couple of years before a potential breakout by 2016. "We wouldn't be surprised to see continued weakness in August," he said. But "from a perspective of two or three or five years out ... gold prices around $1,300, $1,350 or lower represented relatively decent prices. ... Prices around where we are today represent a relatively fair level to buy in." 
Gold up 75% versus the S&P since 2007
With the Dow on course to break its six-week winning streak Friday, some analysts say now is the time to short the stock market. That's what famed contrarian economist Marc Faberhad to say about the S&P 500 in a Thursday CNBC appearance. And with Treasury bond funds seeing record outflows,"the Fed has lost control of the bond market, and this is very important," he noted.

An exodus from stocks and bonds could see a major capital flight to quality -- back into gold. Disregard the negative press about the metal, he said: "All these super-smart Fed watchers and Fed members and super-bears about gold -- these are all people who never owned an ounce of gold in their lives. They came out with sell recommendations on gold. And they don't tell when they go on CNBC or other media that actually since 2007 October, the S&P is up less than 10% but gold is still up 75% -- that they never tell anyone. But basically gold has had a huge correction. Sentiment is ultra-bearish. ... I like it here because relative to other assets ... I think gold is relatively cheap." 

Position your portfolio for another debt-ceiling crisis
Further weakness in the dollar could lie ahead this fall when Washington debates the 2014 budget. That gridlock could put pressure on the greenback and lead to repeat of the 2011 crisis that led Standard & Poor's to slash the U.S. credit rating -- a move that resulted in gold hitting all-time nominal highs above $1,920.
Fox Business reported: "It's been a few months since the last 'fiscal crisis' roiled Washington, D.C. But all of the pieces are in place for a battle royal this fall as Congress mulls approval of a 2014 budget, raising the U.S. debt ceiling and allowing sequestration to continue for another year."
"'I'm expecting the federal budget bedlam to last through the fall and into next winter,' said Stan Collender, a partner atQorvis Communications and a former staffer to both the House and Senate budget committees.

"Here's what we can expect: After weeks of name-calling and finger-pointing, the combatants -- Congressional Democrats and Republicans and the Obama administration -- will hammer out last-minute compromises that satisfy each faction's short-term political goals but do little to solve long-term problems such as an out-of-whack tax code and escalating entitlement spending."

Gold is showing signs of strength in its traditionally weak month of August. Take advantage of these still-low prices before gold reaches its historically breakout months starting in September, fueled by Asian and Western holiday buying and perhaps another debt-ceiling standoff in Washington.

More information can be found online at http://www.goldbullionadvisors.com