Given that gold has hit our target of $1800 we feel it is appropriate to review our outlook on the gold market, the state of key factors that influence gold prices and possible trading strategies going forward.
In 1924 John Maynard Keynes referred to the gold standard as a “barbarous relic”, but we think the new barbarous relic is using gold stocks as a trading or investment vehicle in an attempt to benefit from rising gold prices.
Despite some calling for an explosive summer rally in gold, prices fell again this week on the back of easing concerns over Greek sovereign debt as the Greek parliament successfully passed the austerity legislation required to access additional bailout funds.
Asset price bubbles have occurred since the beginning of financial markets and will continue to do so as long as there remains a marketplace for assets to be traded. A key property of a bubble is that is it near impossible to identify with certainty before it pops, but once it does pop the bubble is apparently obvious to everyone. In our opinion, only those who risk capital and profit betting against a bubble can claim to have correctly identified one.
Seasonality is observable in a wide variety of variables. In business, sales, production, inventory, man hours and the best time to discount can be at least partially predicted by seasonal effects. Gold is no different.