Time for another update, with the latest surge above $1600 USD per ounce last night. As I mentioned briefly in my last update, where to for gold?
First a quick recap – here is the current price activity within the context of a major, long term bull market.
Gold in USD, monthly prices with trend channel and GFC Episode 1
And here we are today (using daily charts – note how the June highs were taken out last week, and the May 2 record high surpassed shortly thereafter):
Gold in USD daily candlestick chart, with 260 day moving average (grey line)
Note that this recent rally has not been caused by a decline in the US Dollar:
Gold (black) and USD Index (green) for the last 3 months - USD is rallying alongside gold
Depending on your point of view and timeline, the possible price targets for this latest run up in gold prices include:
Peter L. Brandt (a renowned commodity trader) has the short term price target at $1654 (based on the recent pattern)
Peter Brandts target based on pattern formation
If the current trend continues for the remainder of the calendar year, the medium term price target is $1700:
Gold in USD weekly prices extended to end of 2011
If you consider that history is repeating, than the target is more likely in the $2700 to $3500 range (using 500 as the nominal point for 2011, and 900 as the “terminal” point in 2012-13):
Gold in USD compared to other bubbles (note this is not semi-log)
Of course, what we are talking about here is the broad assumption that gold will inexorably continue its bull market, flittering from one economic and monetary crisis to the next, with no end game in sight.
Is this time different? Or will The Bernank pull a Volcker and raise rates above their negative real terms, or will the ECB try to contain inflation (or will it be contained by a great swithe of debt destruction?) There are known unknowns that traders and investors face going into the 10th year of this bull market – take care.