The past ten days have seen what could be yet another sea change in the progress of the gold price with a steady rise from the $860s up to over $930 before falling back a little and consolidating in the $920-$930 range where there seems to be a level of downside resistance.
The strong gold proponents feel that this is yet another plateau from which the price will move onwards and upwards back to the $1,000 level and way beyond, but many of the more cautious analysts also seem to be predicting strength at current levels - and a $1,000 gold price again later this year - but with the rise at a slightly slower pace perhaps picking up momentum in the third quarter when prices are traditionally a little stronger.
Reuters quotes Adrian Koh, an analyst at Philip Futures in Singapore, as feeling that there is potential upside resistance at $935-940, after which little would stop the metal moving into the $950s and perhaps beyond while David Thurtell at BNP Paribas reckons that if gold can hang on above the $915 level, it could easily push back to $950 - and then over $1,000 again in Q3.
But beware the dollar. There are very mixed views on where the dollar lies at the moment in terms of strength against other currencies. The big fall back to the $850s and below occurred at a time of relative dollar strength when some indicators suggested that the US economy was not as weak as many had been predicting, and the upward surge of the past ten days occurred as the oil price hit record highs - like gold, oil price strength is also a sign of dollar weakness, although there is perhaps more of a supply/demand balance element here - and the dollar falling back again.
While last year and earlier this year there seemed to be no way for the dollar to go than downwards, gold was strong. When doubts surfaced as to whether this was indeed the case, gold became weaker again and plunged quite dramatically, but now the steadying at current levels suggest a more balanced viewpoint is coming to the fore and perhaps a more steady price level, and a little less volatility, will be seen in the next few months.
There are also mixed signals in the main consumption area for gold, namely jewellery purchases. In some traditional markets like India, big fall-offs in offtake have been seen as dealers wait for lower prices, while in other countries, like China and Vietnam demand has remained strong or even increased as people worry about inflation and see gold as the ultimate inflation hedge. If the gold price is seen to consolidate at current levels then even the reluctant purchasers will have to come back into the market underpinning the metal's strength. And with the general reckoning that any Central Bank sales will be low in the years ahead, and possibly even be offset by Central Bank purchases the overall outlook for the gold price has to remain positive for the remainder of this year, unless there is a huge pick-up in the US and world economies - which seems unlikely in the short term at least.