Flight to Safety and Stagflation Fears Boost Gold

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Technical analysts maintain that round numbers have considerable significance. A decisive break through a major round number such as $1,000/Oz, could well cause momentum to drive the price significantly above that level.

The vast majority of market participants believe that gold will pass $1,000 an ounce with ease this year.

The forecasts from a London Bullion Market Association survey show, however, that only a tiny minority believe that the price will average above $1,000/Oz. While 58% of the 24 analysts and traders polled contend that gold will reach $1,000/Oz, some 42% maintain that the price will average between $801 and $850/Oz and a third between $851 and $950/Oz.

The most bullish analyst, Ross Norman of the Bulliondesk.com, predicts that gold could reach $1250 as investment demand and inflation fears drive it forward. Only three fundamental analysts and traders believe that a move to $1,000/Oz will lead to prices of $1100/Oz or more. Technical analysts maintain however, that round numbers have considerable significance. A decisive break through a major round number such as $1,000/Oz, could well cause momentum to drive the price significantly above that level.

The importance of the gold price passing $1,000/Oz is that it no longer reflects the views of gold bugs who predict apocalypses, but instead those of main stream analysts and economists. Analysts note that the prime reason why the spot gold price has soared 40 per cent from around $650/Oz, only seven months ago, is the US Federal Reserve and European central banks have pumped money into the system to counter a credit contraction...

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