Gold less than $10 from a new all-time high
Posted on 11 May 2010 with 3 comments from readers
Not only has the gold price sailed past the volatility of the last week in global financial markets, gold has positively benefited from the chaos and today put on $15 and at the time of writing is less than $10 short of its $1,226 an ounce all-time high reached last December.
The question then is whether gold consolidates around the new $200 step-up at $1,200, when only recently passing the $1,000 goal-post was such a struggle and only achieved on the third heave, or heads much higher.
Parabolic price rise?
It maybe that this is the point at which gold price rises start to go parabolic. Much will clearly depend on how financial markets behave and that is really anybody’s guess right now.
The $1 trillion euro-bailout yesterday is a lot of money to throw at markets, although the doubts about the effectiveness of this initiative immediately surfaced today and caused stock markets and currencies to retreat from Monday’s gains. Things do not look that stabilized from this response.
A resumption of the wild volatility of last Thursday’s 1000-point plunge in the Dow Jones, still not fully explained as a computer glitch, should be good for gold as a diversifier of risk and safe haven. Bonds are the usual safe haven in a stock sell-off but also look pricey with interest rates so low.
ArabianMoney can see a new all-time high for gold as a done deal but a pretty big shoe will have to drop to send the yellow metal into the stratosphere. British politicians are doing their best but all eyes are still on the eurozone, and that has distracted attention from the UK political crisis.
Asia overheating
Then again Asia is also a bull story that is unravelling before us. China is clearly overheating and its stock market is now officially in bear market territory and thus predicting a crash.
There is plenty of instability and volatility out there to support a much higher gold price. But the real spike will only come in a sudden loss of confidence in the bond market and a rush into precious metals as the only money that cannot be printed.
The devil is that bond market crises generally come from nowhere. All the more reason therefore for buying some gold and silver before that happens.
3 Comments posted by readers:
Based on the fact that western governments have been suppressing the gold price over a long period of time, I don’t believe that gold (& silver) will go parabolic … until, as you stated, the public loses total confidence in Sovereign bonds. But who knows when that will be? A year away, perhaps?
At present, many institutions still have confidence in short term and intermediate term government bonds, but now they’re wary of the long bond; Sovereign funds, like China and India, are not buying the US long bond any more . . . so the US FED has to step up to the plate and buy the long term debt instruments issued by the US Treasury, in order to “make it appear” as though there is still a market for that junk.
The Long Bond is Worse Than Junk:
As a side note, Martin Weiss recently issued a challenge to the US ratings agencies to “do the right thing” by downgrading US government bonds.
China is indeed overheating but its stock market is still at relatively low point. Its real estates is rocketing skyhigh but definitely not its stocks. At 2647, it is nowhere near its all time high at around 6000.
What Will Hasten a Bond Crisis?
It seems that Euro land is now issuing SPVs, and that decision is truly troubling; in my opinion, that will hasten the arrival of a global sovereign bond crisis.