Factors That Will Drive Gold Price Higher

Gold Buddha (Photo credit: @Doug88888)

Many people ask, "Has Gold Price Reached it's Low?" While it's not absolutely clear that it has, signs are accumulating that indicate gold has probably reached it's low and will climb higher over the course of the next several months.

Gold Price Near Resistance

Gary Wagner, who we recently highlighted for his charts indicating gold could dip as low as $1030 per ounce, now says if gold can break through the $1,339 level that it should continue to climb.

Bullion Banks Running Out of Gold?

Zero Hedge highlighted how JPMorgan's gold vault is emptying out at a rapid clip. This led us to bring up the possibility of a short squeeze driving the price of gold up.

COMEX Default

Jim Sinclair writes:

The cause of today’s spectacular rise in the gold price is the reality that with Friday continues large drops in the Comex warehouse gold inventory. No cogent argument can be formed against the reality that because of the continued fall in gold inventory that within in 90 days or sooner the Comex must change its delivery mechanism.

Gold Short Squeeze

Zeal Speculation and Investment, in "Gold Short Squeeze" opens their post with:

Futures speculators have responded to this year’s extreme bearishness plaguing gold by amassing wildly-outlying record short positions in it. These huge and highly-leveraged bets can only be unwound by buying gold futures to cover the shorts. As gold continues rebounding out of its recent hyper-oversold lows, the futures traders on the short side will have to buy. This will likely fuel a massive short squeeze.

Their article concludes:

And given such extreme spec gold shorts, widespread despair, and gold recently hitting the most oversold levels by far of its secular bull, it is due for a monster upleg. As this accelerates, the leveraged shorts will be forced to buy back the gold they owe at increasing rates. This will feed on itself and likely ignite a buying panic. It will very likely lead to the biggest and fastest upleg of gold’s entire secular bull.

China Seeks to Displace U.S. Dollar as Reserve Currency

As outlined in "China Maneuvers To Take Away US' Dominant Reserve Currency Status" China is buying vast quantities of gold in an effort to displace the U.S. Dollar as the reserve currency. Their effort includes creating a trade settlement system which also utilizes the yellow metal.

Inflation

QBAMCO expects inflation:

Inflation will be the means to de-lever systemic balance sheets and it will affect different equities in different ways, at different times and in very different magnitudes. We believe the implied mandate, long precedence and demonstrated current willingness to inflate will ultimately sustain and increase the money stock, which in turn portends further nominal gains.

Taken separately any of the above could be discounted. Together, it becomes more difficult to deny that it appears a number of events are coming to a head which could potentially drive the price of gold higher. From gold pressing through technical resistance at the $1,339.00 level to signs that the bullion banks may be running out of gold have the potential to ratchet prices higher - perhaps to new records.

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