Spot Gold 13 Oct 2010

Spot gold continues its relentless climb higher today breaking yet again in new high ground having opened the trading session at $1350.10 to trade at time of writing at $1369.50, marginally below the high of the day of $1373.85 per ounce.  The early part of the week was characterised by relative inactivity in spot gold as the gold market consolidated ahead of Tuesday’s key release of the FED minutes and the surge in the metal today has been largely fuelled by the fundamental news contained in this statement which in simple terms confirmed that quantitative easing will commence by the end of the month.  The net result of this policy in broad terms will be a further dramatic weakening of the US dollar and a consequent rise in bonds, equities and commodities.  Gold, in particular, along with silver is likely to be one of the main beneficiaries as investors seek concrete assets, moving away from paper based investments which are likely to suffer as the currency wars escalate further with central banks around the world devaluing their currencies in an effort to support their export markets.

From a technical perspective the longer term outlook for gold remains strongly bullish and indeed Goldman Sachs have revised their forecast for spot gold higher to $1650 per ounce by early next year.  My own forecast is slightly more modest, at around $1450 per ounce, but either way, the trend higher is extremely well established with both the 9 and 14 day moving averages providing platforms of support during any temporary pullback as was evidenced in Monday & Tuesday’s gold trading session.  The 200 day moving average on the daily chart is now sloping higher providing us with a further confirmatory signal that the longer term trend is set to continue for some time to come.

Gold – another record high