Could gold soon hit $730?
Gold passed the $700 dollar mark for the first time in sixteen months last week and, with its fundamentals looking good, the yellow metal will go from strength to strength.
Gold is on the move again. The yellow metal has eclipsed $700 an ounce for the first time in 16 months and is within sight of May 2006's 26-year high of $730. Gold appears to have broken out to the upside and begun "a new bull market upleg", says technical analyst Martin Pring of Pring.com.
The fundamentals look encouraging too. Gold's latest move was spurred by last Friday's weak US jobs data, which weakened the dollar now at a 15-year low against a basket of trading partners' currencies as it fuelled expectations of lower interest rates in the US after next week's Fed meeting. The prospect of more rate cuts as the Fed tries to temper the impact of the credit crunch implies further weakness for the dollar and upward pressure on inflation, which risks eroding global confidence in the dollar as a store of value. Throw in the prospect of a deepening credit crunch and it's no surprise that gold is regaining its appeal as a safe haven.
Note too that gold is once again appreciating against all currencies (it is at a six-month high against the euro), which points to "a long-awaited rerating" and is a phenomenon that accompanies gold's "best upside moves", as David Fuller notes on Fullermoney.com. The supply and demand picture is also improving, as Robin Bhar of UBS points out. Physical demand is on the rise in India which consumed 50% of global mine output in the second quarter China and the Middle East. Global demand rose by 11% in the first half, while supply fell by 4%. Given all this, it won't be long before gold hits $730, says Bhar.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Sign up to Money Morning
Our team, led by award winning editors, is dedicated to delivering you the top news, analysis, and guides to help you manage your money, grow your investments and build wealth.
-
Bitcoin price one of the most-asked questions on Alexa - here's how to buy the cryptocurrency
According to figures from Amazon, which cover September 2023 to November 2024, pop star Taylor Swift and Bitcoin were named among the most popular Alexa queries of 2024
By Chris Newlands Published
-
Investing for children this Christmas – five ideas
It might not come with a shiny ribbon, but an investment fund could be the gift that keeps on giving. We share five ideas if you are investing for children this Christmas.
By Katie Williams Published