Inflation, Investing and Everything
Gold is surging as voters cast ballots in an extremely close U.S. presidential election. Gold prices for December delivery increased 2% Tuesday to finish at $1,715 per ounce. Other commodities were mostly higher, including oil prices which ended up 3.6%. Traders are waiting for the results of the hard-fought race between President Barack Obama and Republican Mitt Romney. Analysts say the outcome could determine the future course of Federal Reserve's economic stimulus measures, which have benefited commodities. Commodities also are being supported by a weaker dollar. Since commodities are priced in dollars, a weaker dollar makes them cheaper for traders who use other currencies like the euro.
- As painful as it was for gold investors and other net long gold traders to watch, last week's almost jump-off-the-cliff drop in Comex gold prices has been matched by this week's vertical climb. It's a refreshing change for one thing, and hopefully with the conclusion of the US elections, there would be somewhat more certainty in the market environment, both in the commodities futures exchanges as well as in the broader stock markets. Hopefully, this doesn't turn out to be a 1-day wonder, though looking at the short-term chart one can already see some tapering off there.
Looking at the longer-term 1-year gold chart, one can see that the gold price has done almost nothing for close to a year, remaining range-bound within a $100 range above and below $1650. It would take a decisive break above $1750 or even better, $1800 to prove once and for all that we're out of this frustratingly range-bound consolidation.
Given the positive 50/200-dma upside crossover, it looks like there may be a better than even chance of that occurring. Add to that the bounce off oversold conditions, and if the momentum continues going in the same direction then a renewed assault on the old heights of $1900 and above would not seem too far-fetched a possibility.
And if there is to be a "one more thing", it is this : the longer term gold chart looks like a damped spring once again. The last time this phenomenon was mentioned here, gold prices were pivoting about the 1200 range and the time window was about 6 months. We've seen how prices have gone up since then.
This time round, the scale is apparently much larger (and so are the stakes as well). The pivot point is now about 1700 and the time window is 1.5 years, give or take a few weeks. Though history may not repeat exactly, there's still a good chance of it rhyming regardless, hence from a longer term chart we could see a possibility of beyond $2000 gold prices within the next couple of years or so.
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