Gold hit $884 as this post was written early on Monday 29th December—the day that Indian astrologers have down for a stock market crash. That would seem unlikely given thin holiday trading. But a further rise in the gold price, even if short term, looks probable for these four reasons:
1. Geopolitics: Israel has attacked Gaza with considerable loss of life, a reminder of the chronic political problems of the Middle East with Iran and Pakistan other possible flash points. Arabs are big investors in gold and respond to disruptions in their own backyard.
2. Physical delivery requests are mounting at the Comex futures exchange, which could well result in an immediate shortage of gold at year's end. The futures market looks about to breakdown, giving control of the gold price back to the physical market where available stocks are low.
3. Gold preserved value through the storm of 2008, and 2009 looks no better, while investors are increasingly concerned about the bubble in the bond market. In the investment cycle, the next step is a bond crash and a flight to precious metals.
4. The dollar rally looks to have already broken down, so look for a swift reversal to dollar devaluation and gold appreciation. That would also boost the oil price—usually a positive for gold, and also linked to geopolitical instability in the Middle East.