Gold Index
Gold Prices Gaining
Gold prices took a pretty good ride this month even on fears over lingering uncertainty in Japan and the conflict in Libya, proving that gold bugs consider to see precious metals as a safe haven for buyers.
The Street reports that gold for April delivery added $10.10 to settle at $1,426.40 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,435.10 and as low as $1,423.50. The spot gold price was rising $8.30, according to Kitco’s gold index.
Naturally, everyone wants to know if the ride can last. Prices are at all-time highs again for gold, but many wonder if events in the Middle East will turn shy traders away.
“It becomes harder and harder as we seize higher prices for funds and for speculators alike to actually buy the high prices,” Brian Booth, senior market strategist for Lind-Waldock told The Street. Booth said he was convinced that gold will still head higher especially with bad headlines coming out of Japan and Libya, which will draw traders back into the gold market.
Gold did benefit Monday as investors assessed the current risk levels of the global economy. Investors were purchasing gold as protection against the continued uncertainty in Japan, The Street says, as well as U.N. airstrikes against Libya. The SPDR Gold Shares(GLD) added almost 10 tons of gold earlier this month on renewed buying.
Gold and silver “could be poised for further gains as investors seek to diversify towards safe-haven asset types with a mix of fresh buying and short covering potentially leading gold [and] silver to retest recent highs,” James Moore, research analyst for FastMarkets also told The Street.
“Gold is still the chosen haven for European and Far and Middle East investors,” says George Gero, senior vice president at RBC Capital Markets, “but open interest has not grown either in gold or silver as gold barely is at 500,000 and silver is still under 135,000,” which points to a lack of longs in the market.
Any hints of inflation are typically good for gold prices as investors buy the hard asset as paper money becomes worth less, says The Street. The real inflation worriers would have already bought gold as world governments staved off disaster by pumping money into the system in 2008/2009. But for traders and investors who missed that trade, they might be more apt to jump in.
Xinhua News Agency, China’s state run newspaper, said recently that the concerns that inflation would be one of the biggest risks “facing the world economy … has become a reality.”
Airstrikes were also continuing in Libya as U.N forces led by France, the U.S. and the U.K. pummeled Gaddafi’s forces. Although the goal of the coalition is reportedly not to remove Gaddafi from power but to protect its citizens, the intervention is helping the insurgents keep their rebellion afloat.
Lingering concerns over prolonged oil disruption in the Middle East-North Africa region are also propping up oil prices, which have been moving in tandem with gold prices.
Investors are also running out of safe places to put their money. The yen is typically a safe haven but with G7 nations buying up U.S. dollars and selling yen to push down its value, that asset might provide less cover for investors, which makes gold more appealing.
The Street suggests that although the story for gold might be appealing for investors, traders are still a little standoffish. Scott Redler, chief strategic officer for T3Live.com, said “I’m still just holding what I have.” Redler isn’t interested in getting more heavily invested in the gold market. “I don’t think it’s that exciting, I don’t think there’s that much upside.”
Redler thinks that gold can go higher just not a blockbuster move. The metal jumped 26% in 2010 and has risen just 0.7% in 2011. Goldman Sachs(GS) said Thursday that gold could trade to $1,480 within the next three months, which would be a 4% move.
Redler is also testing the water with a small long position in silver. “I don’t think that silver is going to be as [much of a] safety trade like gold … I think the action in silver might slow down.”
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