You can’t keep a good market down

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(Kitco News) – It has been another busy week for the gold market but what has really jumped out at me is how durable the market has been. Everything, including the kitchen sink, has been thrown at the gold price and yet it has managed to hold $1,500 an ounce.

Let’s just give you a quick recap: The Federal Reserve struck a strong neutral tone after it lowered interest rates for a third time since July; third-quarter GDP came in better than expected and the U.S. economy created a solid 128,000 jobs in October. Oh and the equity markets are trading near all-time highs. That is a lot of bad news for gold, yet the price is seeing its third consecutive week of gains.

According to some analyst, the fact that the Fed is no hurry to raise interest rates means that gold’s low opportunity costs make it an attractive alternative asset. And it could only take a sniff of bad news in the global economy to send investors back into gold.

What is interesting though is that gold’s resilience around $1,500 isn’t creating a lot of bullish sentiment in the mining sector. I just returned from the Silver and Gold Summit in San Francisco and while the investor sentiment was positive, it wasn’t overly bullish.

Sprott’s Rick Rule pointed out that majors are in a sweet spot as costs fall and gold prices rise, but investors still need to do their homework to find the profitable companies.

“Most speculators don’t know how to segregate the good the bad and the ugly,” he said. “If you spend your time disciplining yourself as a speculator, focusing on good management teams… the money that can be made in this sector… is incredible.”

Also holding back sentiment is the fact that junior exploration companies haven’t rallied with the higher gold price.

Nick Hodge, founder of the Outside Club, said more merger and acquisition activity among junior explores should help to improve investor sentiment.

“The gold market is a cascading effect, you see the large caps move first, then the mid-caps, and then the juniors,” he said. “And some of these juniors are really quality ones. You will see these quality assets start to be taken out.”

But for now we will wait and watch.

Have a great weekend!