What’s Shaping Gold Price

There were those last week who mentioned a word of caution. A caution about a gold price bubble. If gold were a person he’d start to feel dizzy by his extraordinary growth. In fact he’d have felt dizzy since 2001, when this bull market started. But we can’t help but think that many analysts and economists all missed the credit crunch. What’s to stop us all from misinterpreting this bull market in gold? Could this be a bubble?

We all know of the movements of the central banks to firm up their reserves, of China and other emerging markets’ reluctance to keep piling up reserves of the US dollar, and we’re all familiar with governments across the world pumping cash into the market (which must some day come home to roost). These are all the causes that are pushing the gold price to new highs today. But then why aren’t we saying, ‘to hell with it’ and placing all our money into gold and gold related shares?

Because we’ve seen the credit crunch happen and despite us seeing the rise of the price of gold we’re all now much more wary investors. As it happens the gold price is climbing still. Over the past week the gold price broke out into new all time highs reaching 1,095.80 dollars per ounce on Wednesday.

Gold has traditionally seen periods of trading sideways intercepted by sharp price rises. We expect the gold price to trade sideways for a while before something decides its fate. ‘Events, dear boy, events!’ was Harold Macmillan’s answer to a journalist’s question about what can most easily steer a government off course. And this is the same for the price of gold.

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