Gold – Will It or Won’t It Break Out?

August 23, 2010 | By | Reply More

Gold IngotYet another week has gone by with spot gold threatening to leave the $1230 an oz. barrier behind but failing to maintain any impetus. Is now the time to ask “will it or won’t it break out” of the $1200-$1230 range that has prevailed for most of the summer, not forgetting a brief foray to over $1250 for a short space of time.

History tells us that the summer, and particularly August, is not a time for fireworks for gold, or for any other precious metal.

One simple reason, amongst others, is that the hard core of specialist traders that move the market are enjoying their vacations secure in the knowledge that little exciting can happen to prices while most, maybe all, are enjoying lazy days in the sun.

For those who believe in conspiracy theories, that will also include the political appointees and their world wide coterie of bankers that are rumored to attempt to manipulate the silver and gold market to the advantage of their currencies, most particularly the greenback.

Be that as it may, we see the performance of the yellow metal for the last three months as encouraging.

The swings and roundabouts of stock markets and currencies during this period have had little effect. The old ties with the price of oil and the performance of the dollar no longer have the significance that was so apparent up until earlier this year.

Gold now trades much more on its merits as a store of value as paper currencies continue to lose their luster. This summer’s trading pattern indicates the underlying strength of gold.

Without again going into the details of why we think the long term outlook should push the price up to, and over, $2000 an oz. by early 2011, or hopefully before, can we expect a break out at the beginning of September, only a week away and when the hols are over?

We believe that there is a good chance that this will happen but we have a reservation. The expectation of a double dip recession seems to be growing. If this gathers pace as traders return to their desks and financial markets return to the norm then gold, silver and PGMs will all suffer as the need for liquidity become the ‘sirens song’.

In the event this could become a great opportunity to buy into the precious metal market at what will be seen in hindsight as bargain prices. Failing that this week may be the last opportunity to get into gold at less than $1230 an oz.

Our advice – either spin a coin or bite the bullet and buy this week but what do we know? Actually we think silver will have to play catch up with gold and that’s where our few pennies are going to go!

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