Gold's sell off continued yesterday with gold down some 2% but it has stabilised in European trading and is trading at $1,141/oz. Gold has fallen by less in euro and GBP terms and is trading at €772/oz and £700/oz. Support for gold is currently seen at $1,122/oz and resistance at $1,167/oz.
Sovereign debt markets remain nervous with concerns about the fallout from Greece's downgrade and how this will affect the already damaged balance sheets of some European banks. Bearish analysts who were calling gold a bubble when gold traded at $700/oz and at $850/oz are becoming more vocal again but they are likely to be proved wrong again as this has all the hallmarks of another correction and consolidation. Especially as physical demand for bullion remains very robust and will likely continue to do so as long as there are sovereign debts risks, risks of double dip recessions and as long as investors remain concerned about the medium to long term inflation threat posed by the continuing unprecedentedly loose fiscal and monetary policies.
Gold prices would have to reach the inflation adjusted high of nearly 30 years ago of some $2,300/oz before it could be considered a bubble (see chart above). Having said that there will be many sharp corrections along the way which will see speculators and leveraged traders incur large losses. Predicting the future price of any asset is extremely difficult and as ever passive asset allocation and real diversification remains prudent.
Silver is trading at $17.81/oz and continues to take its direction from gold. In euro and GBP terms silver is trading at €12.08/oz and £10.93/oz. It has fallen more than gold in recent days which is unusual and bodes well for silver's performance in the coming weeks.
Platinum Group Metals
Platinum is trading at $1,425/oz while rhodium and palladium are trading at $2,300/oz and $372/oz respectively.