What Gold's Latest Break Though $1,200 Could Mean

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". . .the immediate outlook looks to be favorable for gold."

I suppose it depends who you listen to whether you believe that gold is going to move to new heights, or whether the recent sharp rise back above $1,200 is just a blip and it will return to lower levels. The latest European moves to stabilize the euro and prop up the PIIG economies may temporarily impact the gold price and bring it back a little. Indeed there are some who believe the combined forces of the U.S and Eurozone will be mobilized against gold to bring it crashing down as they feel that an ever-stronger gold price brings home the global weakness in the major Western currencies and the central bankers will be trying to disguise quite how weak these currencies really are.

Ultimately, one suspects, gold will triumph—at least until a new order emerges. It seems inevitable that given the amount of new money in circulation—and continuing to be unleashed in the aim of stimulating global economies—currencies have to have been devalued in terms of anything seen to be relatively stable and perhaps gold offers the only real perception of stability out there.

It does also seem that the feeling that the bullion banks—and even reserves held by central banks (CBs)—may not be all they are held out to be is gaining credence. While some of the wilder theories are almost certainly wide of the mark, suggesting the banks are trading far more gold than they hold title to may well be correct. Banks have nearly always operated in this manner with cash.

Gold will likely follow an overall upwards path, but with various falterings along the way as external factors impact and spook cautious investors, or upturns in the general stock market convince them that there may be greater gains to be made in equities. As overall nervousness in financial markets persists, the numbers of those switching to gold as an insurance policy and wealth protector will continue to increase, thus helping underpin the price. So overall the immediate outlook looks to be favorable for gold.

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