Gold Reaches Highest Level For Eight Weeks

May 21, 2009 | By | Reply More

Spurred on by a weakening dollar and a strengthening oil price, gold reached its highest level for eight weeks by the New York close yesterday.

The price action this last three months has given this observer a dense of ‘déjà vu’ as the long expected break through to $1000 and above has had so many false starts. Gold – will it, won’t it seems to have been the question that never gets given a definite answer.

Perhaps politicians really do control the gold market as the conspiracy theorists claim.

A few new factors have come into play recently to add to the already long list of reasons, already known to our regular readers, for gold to reflect the parlous state of the world’s leading economies.

China is a major buyer, investment demand for the first quarter of 2009 has risen by 38% and worldwide demand for the year amounts to 1015 tonnes up by 280 tonnes.

This week we have seen the ‘green shoots’ of recovery struggling to take root, not aided by the utterances of the former Fed chairman, Alan Greenspan, and a recognition that, despite some short term deflation, the prospects of an eventual high inflationary environment are not likely to be avoided as once again the US Fed expects to throw even more fresh money into dubious asset purchases.

We nearly missed out on mentioning that the gurus at the Fed announced yesterday that they projected a deeper recession.

Some may point out that gold jewellery demand has fallen sharply but the short fall has been more than made up by increased investment demand.

It will only be a question of time before India and other jewellery buyers get used to the idea that gold will not become much cheaper, if at all, for a number of years yet and jump back into the market.

How much longer the logical consequences of all the factors heralding a surge through the $1000 barrier can be stemmed is still anybody’s guess.

It should have already happened, perhaps yesterday will be seen as the take off and not just another false dawn, nevertheless, sooner or later gold will not be denied.

One last thought, worldwide production is expected to fall yet again this year.

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