After weeks of strong signals that it was ready for a surge upwards, Gold finally broke through not only several levels of resistance, but the all-important psychological barrier of $1000 and has soared to a new all-time high of $1,038 per oz.
Since early last year, gold has attacked the $1,000 per oz. price level numerous times, and now has succeeded in breaking through the $1,000 per oz. barrier handily.
Gold today (October 6th) rose to a record on speculation that inflation will accelerate and erode the value of the dollar, boosting the appeal of the precious metal for investors seeking to preserve their wealth.
Gold futures climbed as high as $1,038 an ounce in New York, topping the previous record of $1,033.90 in March 2008. The spot price headed for a ninth straight annual gain, the longest rally since at least 1948. The dollar fell as much as 0.6 percent against a basket of six major currencies.
“Gold has just begun its ascent,” said John Brynjolfsson, the chief investment officer of Armored Wolf LLC, a hedge fund in Aliso Viejo, California. “As central banks print more and more money, the private demand for gold as an investment and inflation hedge is destined to grow. It’s pretty clear that gold will be at $2,000 by 2012, and it could happen a lot faster.”
Technical analysis is always after the fact and it only tries to get insights from historical patterns and there is obviously no guarantee on anything. However, if this 40 year pattern holds and gold stays in the 4-digit territory for a month, the chance is very good that gold will never fall back to $1,000 level again on the monthly chart. This implication is huge, which means anyone who has bought gold before today below $1,000 will make a profit, a true safe haven.
One reason why gold has reached a new all-time high may be the fact that, for the last several weeks, Chinese state television has been openly promoting gold and silver as an investment and a store of wealth. Not long ago, the Chinese announced that they had been “secretly” buying gold – starting from 2003 they had bought over 600 metric tons of gold, bringing the gold to cash reserve ratio from 1.3% to 1.7%.
So does this recent run-up in gold signal a pending stock market correction? Probably not in the short term. In fact, while a correction may occur, the long-term record does not support the idea that gold rises predict stock declines. Most analysts believe that the value of the US dollar and gold are somewhat linked. So as the dollar declines gold rises typically but not so much the same thing for the overall stock market. Having said that, however, many analysts also believe that the markets are starting to become over-valued at this time. The markets have risen too far too fast relative to the pace of recovery in the global economy and it is likely that a significant correction in the markets is on the horizon at some point. When that will happen only time will tell. For now the markets seem robust and moving upward and onward.
Could gold go appreciably higher from here? With large hedge funds and central banks (such as the Russia and People's Bank of China) diversifying into physical bullion, investment demand remains as robust as ever and looks set to overpower the significant decline in jewelry demand and demand from the Indian subcontinent. The United Nations UNCTAD report warning that the "economic winter" was not over and calling for a new global reserve currency may have led to some buying also.
“Even though the current inflation rate is low, the risk of a blowup in inflation in the future is becoming higher all the time,” said Adam Farthing, Deutsche Bank AG’s head of metals trading in Asia. “Gold is pricing that in.” Farthing projected the metal will reach $1,150 by the end of the year. “There’s definitely switching going on out of energy and agricultural commodities into gold,” Farthing said.
In addition to the bullion looking poised to move higher, we feel there are many opportunities in gold stocks as well. We have highlighted a few of our favorites below:
Gold Stocks To Put on Your Radar:
American Sierra Gold (OTCPK:AMNP) - American Sierra is an American gold exploration company headquartered in Nevada, the heart of American gold country and sits a few miles south of a mine currently producing 200,000 ounces of gold a year.
Aurizon Mines Ltd (AZK) - Canadian gold mining company engaged in the exploration and development of mineral properties in Quebec, Canada.
Northgate Minerals Corp (NXG) - Canadian company engaged in mining and exploration of gold and copper properties in Canada and Australia.
Richmont Mines (NYSEMKT:RIC) - engages in the exploration for, and acquisition, development, and production of gold in North America.
Nova Gold Resources (NYSEMKT:NG) - engages in the exploration and development of mineral properties in Alaska and British Columbia. The company primarily explores for gold, silver, copper, zinc, and lead ores.
Vista Gold Corp (NYSEMKT:VGZ) - engages in the evaluation, acquisition, exploration, and advancement of gold exploration and potential development projects in North America, Australia, and Indonesia
Barrick Gold Corp. (NYSE:ABX) - primarily engages in the exploration, development, production, and sale of gold worldwide. It also produces copper and silver; holds interests in a platinum group metals development project and a nickel development project; and has interests in oil and gas properties
Golden Star Resources (NYSEMKT:GSS) - is an international gold mining and exploration company that produces gold in Ghana, West Africa owning a controlling interest in four significant gold properties in southern Ghana.
Newmont Mining Corporation (NYSE:NEM) - is primarily a gold producer with significant assets or operations in the United States, Australia, Peru, Indonesia, Ghana, Canada, New Zealand and Mexico.
Keegan Resources, Inc. (KGN) - is a junior gold company and owns properties including the Esaase Gold Property and Asumura Gold Project in southwest Ghana, West Africa.
Banro Corporation (NYSEMKT:BAA) - is a Canada-based gold exploration and development company. The Company holds, through four wholly owned Democratic Republic of the Congo (NYSE:DRC) subsidiaries, a 100% interest in four gold properties, which are known as Twangiza, Namoya, Lugushwa and Kamituga.