Gold just keeps rising. This week it hit a new record high above $1,260 an ounce. Ongoing jitters over Europe helped underpin prices. In addition, the news that Saudi Arabia’s central bank had upwardly revised its estimate of its gold reserves was a reminder that “central banks are keen on the metal after two decades of selling” bullion, says Javier Blas in the FT.
Gold may now be set for a correction, however. Strong recent gains have left it vulnerable to profit-taking. As Dominic Frisby points out in our free daily email, Money Morning, the summer season is traditionally weak for gold. Moreover, gold stocks have been trailing the metal, which often presages a setback.
Still, the long-term outlook remains compelling. Supply is tight and there are plenty of potential worries to fuel demand for a safe haven. The eurozone could well break up. Fears that central banks could debase their currencies even further by printing yet more money are likely to intensify as a double dip becomes more likely. So David Rosenberg of Gluskin Sheff sees the yellow metal reaching $3,000 an ounce.