Just when investors started doubting the safe-haven status of gold at the time of the sub-prime mortgage debacle putting pressure on most financial markets, the yellow metal came to life and staged a spectacular $56 rally. Although not expecting anything as dramatic, I have for a while been advocating a strong emphasis on gold (see posting “Gold - more than a safe-haven play”, August 14, 2007).
The last week’s move has taken the gold price to above $700 for the first time in more than 16 months. It has also taken gold to within $143 of its all-time high of $850 reached on January 21, 1980 and within $23 of its May 12, 2006 high of $730 (which, incidentally, was the highest level since 1981).
The surge in the gold price also saw the StreetTracks Gold Trust (GLD), the bullion-backed ETF, adding an additional 51 metric tonnes of gold since September 4, for a total of 567 tonnes on deposit. This equates to a market value of $12.9 billion.
As they say, a picture tells a thousand words …
Source: StockCharts.com
The chart pattern for gold has been a classic one of mapping out consistently higher lows, and this positive trend is now being confirmed day by day by an increasingly bullish fundamental landscape, especially in the light of central banks now running the printing presses and pursuing an “inflate or die” monetary policy. Not to mention a rampant oil price that has just reached an all-time high.
September 14, 2007
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believing in gold?
Depends on your age. The last generation has no back up experience. Spoiled brats with too much money, not knowing what to do with them.