This Time $1,000 Gold Looks like It May be for Real

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". . .if $1,000 is indeed a new floor, what is the upside?"

Each time gold has reached the 'magic' $1,000 mark before there has been an almost immediate extremely sharp drop as large numbers of investors take profits. Computer programs will have been set to sell at this level—yet in reality $1,000 is a pretty arbitrary point in gold's upwards cycle.

This time there seems to be much more strength behind maintaining this level and the profit takers may regret their moves—though 'profit is profit' is a wise adage in the investment sector. The gold price has tested downwards levels—falling back as far as $984 twice yesterday, but so far every time it has fallen back its has clawed its way back up to above the $1,000 level again—helped, admittedly, by dollar weakness. This is a definite sign of consolidation and the suspicion is that $1,000 may effectively become a new floor.

This is, though, a chancy prediction given the gold price's past history; but if $1,000 is indeed a new floor, what is the upside? Several sober commentators are looking for $1,200 this year if the price holds its current levels ($1,004 at the time of writing) for a few days more.

What is also interesting about the recent price performance is that it has been achieved in the face of rising stock markets and ever-increasing confidence that the worst of the world's economic woes are behind us. Gold's earlier run ups have been tied to investors seeking what they see as a safe investment in case of a second stock market crash, and while one certainly can't rule such a scenario out it does appear that investors in general are now discounting the likelihood of such an event—yet gold has continued to rise.

The strength in price though has been helped by the continuing weakness of the U.S. dollar, which has reached its lowest point this year against a currency basket and, as always this generally begets increased gold prices—not least if gold is to maintain its price in other currencies like the Euro.

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