Even with no QE3 investor remain long gold

Despite the sharp pull-back in gold last week, which was
much greater than anticipated, we believe that the metal will
move higher into 2012. Our view remains unchanged: we
prefer to be long gold. Short term, we believe that gold should
find support on dips — physical demand is strong when gold
pulls back. Our strategic view remains unchanged too: we
continue to believe that gold will push higher into 2012.

We note that gold may pull back again towards the $1,720
level in coming days as no change in the Fed’s
policy stance and no immediate successor to QE3.
However, we also note that we don’t discount the probability of QE3 completely sometime in the future. The real economy and market sentiment has taken a knock in recent weeks and economic data is starting to reflect this. We keep a close eye on the weekly ECRI leading indicator. Recently it stared to decline but the slope is not nearly as steep as before QE2.


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