Gold prices continue to surge as concerned investors flee volatile stock markets and seek out safer places to put their cash. On Friday the gold price hit a six-month high of $1,287.95, according to data from the BBC, putting record prices in sight.
The revenue warning by Apple earlier this week continues to send shockwaves through global stock markets as worries over slowing global economic and corporate growth leave investor nerves shredded.
TRADITIONAL SAFE HAVEN
Gold is traditionally considered a safe investment during times of uncertainty, and weakness in the US dollar has added to demand for the precious metal by making it cheaper for holders of other currencies.
‘Gold is overbought on most measures and needs to consolidate but with the speculative long still building, the market will be looking for $1,300 sooner than expected,’ says Saxo Bank analyst Ole Hansen.
‘If the fourth quarter theme of lower dollar, stocks and yields carries on, gold is likely to break higher and set its sight on the previous high of around $1,380.’
Gold prices were in decline through most of 2018 but that trend started to reverse in early November, presumably in response to the global stock market correction that sparked widespread equity selling at the beginning of what has become known as ‘Red October’.
INDICATIONS POINT TO EVEN HIGHER GOLD PRICE
Technical analysts are also seeing positive signs for further moves higher for gold.
Gold has ‘broken through key resistance around the $1,287 mark, the 61.8% retracement of the move from the 2018 high to low,’ one chartist said today. ‘Next stop is $1,300 and then $1,305, which would bring into view the 76% retracement near $1,316.’
Most investors dismiss technical analysis but it should be ruled out completely at your peril. That’s because large numbers of financial institutions and fund managers retain the faith, often through algorithmic trading systems that can move billions of pounds of funds in and out of markets automatically on the say so of charts.