GOLD NEXT TARGET $450.00/oz
Gold prices break through $431.50 Next likely target $450.00/oz
4th November 2004
With the US Presidential election out of the way and with no change at the top, the markets are once again focusing on the underlying trends, notably the potential for further dollar weakness. With President Bush still at the helm, Middle East policy is expected to remain hawkish and as such high oil prices are likely to continue to be an issue. The weaker dollar and strong oil prices are raising the temperature in the financial markets. Will high oil prices lead to slower economic growth, or will they cause inflation? A rise in inflation could put the US economy in a difficult position, if the Fed has to raise interest rates faster than the market expects it could rein in consumer spending and slow economic growth. Higher interest rates may eventually help support the dollar, but in the near term it could worry the US equity and bond markets and encourage foreign investors to sell US assets. A combination of dollar weakness and potential for the weaker dollar and high oil prices to negatively impact economic growth is likely to support stronger Gold prices.
Gold prices last traded at $431.50/oz on 1st April, but prices then failed to follow through and liquidation selling saw prices fall back to the low $370's/oz in early May. Since then prices have climbed steadily to recapture the $420.00/oz level and then the $425.00/oz level. The move above $431.50/oz now opens the way for a move up to the all important $450.00/oz, although some consolidation may be needed first.
Energy has been building up in the Gold market, open interest has been hitting record highs suggesting both shorts and longs have built up positions. Another indicator has been the Traffic Barometer at TheBulluionDesk.com which records the number of hits on the website each day. The barometer has been at record levels over the past two weeks with traffic up 50% on normal levels. With the market now breaking higher, short-covering combined with greater interest in the market, may lead prices into another trading range.
William Adams
TheBullionDesk.com