At gold’s present rate of return, we’ll see gold price at at least $1400 an ounce in one year. Remember that just a year ago gold was still testing the $1000/oz. mark. And so this estimate of gold rising by another $200 already starts to seem conservative. If gold’s pace of increase is quickening, we will only need to see another problematic headline out of Europe or another bad month of job losses in the U.S. to send gold higher again.
Recall that just a week ago, the price of gold was still sitting back in the risk slump following a period of no bad headlines out of Europe. Gold oscillated between $1180-$1195 for a while.
All of a sudden, now, with the 131,000 job losses (July) in the U.S., gold has hit its catalyst for beginning the seasonal upswing in precious metals performance.
Gold Buying Season Begins
Seasonal investors know that this is the time of year when mass purchases of gold often begin for jewelry manufacturing, in particular, in India. This still represents only a fraction of gold’s appeal worldwide, but it does take a drain on supply.
Couple that with the typically problematic September-October period for stock markets, and the price of gold is bound to climb more with seasonal risk aversion. Since last year’s markets sent gold up past $1020 in a short period of time, I expect that this season will see gold break out past its recent high of about $1247 an ounce.
New Record for Gold Price
Realistically, I think we could see gold quickly break out to $1260 or even $1270 in short order if anything dismal and unexpected to the downside occurs in the equity markets. Maybe it’s another flash crash, maybe it’s fundamentals – continued commitment on the part of the Fed to keep rates at zero.
Last year everyone thought gold was forming a bubble when it topped out and fell back into the $1000 range again. I admit, after a while, I started to think that might be the case, too. But gold has since “bubbled out” twice and shown its resilience for breaking past the $1200 mark. As I write, gold was last at $1205 an ounce.
I’m not trying to be the first to make the “right” call on gold or prove others wrong. My point is just that moves in gold can be a very interesting phenomenon and one shouldn’t underestimate the power of pressure on the gold price. I can’t say I’m a gold bug because I actually don’t even currently own any gold – but I have to say that the gold bugs’ analyses are probably underappreciated.
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