Gold Price - Short and Medium Term Outlook
The last posting on the price of gold discussed whether the price would go up or down. Gold was at a cross roads near critical support points. This article gives some insight into the short term and medium term direction.
As posted previously, gold had started to move sideways after hitting support at around $885 per ounce, bouncing up, then falling through the support. As predicted, once it failed to hold at $885, it fell.
I believe the reason for this is that the stock market has stabilised. Gold is still recognised as a safe haven and store of value, but this is not as important since the market is now perceived as less unstable. I am still bearish on the US dollar while the war in Iraq continues, but believe some money is now flowing into the stock market rather chasing the security of gold.
What is the short term direction? Well I think that gold will stabilise around $850 per ounce. If it falls through this, it will keep going to its next support point. I see the medium term direction as sideways, with upward movement possible if there is another sudden crisis. As pointed out last time, the uptrend has now been broken, and gold will move up and down in price.
In the long term, I am bullish on gold simply due to the fact that the US dollar is no longer a safe haven. This is due to continual inflation of the money supply, which means that the spare money seeks out assets.
In addition, long term petro-wealth must be stored somewhere. High oil prices mean a movement of wealth from energy consumers to energy producers, and gold is a logical place to store this, as is real estate in the Middle East.
I am interested in reader views on gold - please feel free to leave your thoughts on the direction of gold.
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