Can $1,000 Gold Last?

Frank Holmes submits:

Gold has cracked the $1,000-an-ounce barrier for a second time. The first time, in March 2008, the price fell back to three digits within a couple of days. What about this time?

No one knows the answer to that question, but there are some plausible reasons why the gold price could stay higher longer this time around.

The first reason is one that we’ve discussed before—we are now in what has historically been gold’s strongest season of the year. September is gold’s best month of the year in terms of month-over-month price appreciation, the key driver being jewelry makers stocking up for holiday buying in Asia, the Middle East and North America.

A second reason relates to the weak dollar due to prolonged rock-bottom interest rates and massive deficits being piled up in the U.S. Gold and the dollar typically move in opposite directions, so a weak dollar tends to be good for gold. That inverse relationship is intact so far in September—the DXY dollar index has lost 2 percent of its value so far this month September and on Friday hit a 12-month low, and over the same period spot gold has risen about 6 percent.

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