Agreed. I see the current drivers for the gold price as follows:
1. Inflation concerns in the US mean that ordinarily, the Fed would raise interest rates to curb demand - however doing so would break the backbone of the US housing scenario. The next move for US rates eventually will be down, a move to resurrect the housing industry and stimulate the economy and flagging stock market. The step down in rates will increase the interest rate differential b/w the US and foreign currencies (eg NZ dollar) and subsequently devalue the dollar further as investors seek higher yielding currencies - good for gold.
2. The sell off in gold over the past week or so was primarily from investors looking to cover margin calls when the market got hit hard. It will rebound shortly and should be viewed as a buying opportunity.
3. Geopolitical concerns. Ongoing worries over Iraq and Iran. From a distance it appears inevitable that there will be some form of conflict b/w the US and Irans nuclear program.
I'd be reasonably confident we could see a challenge ovewr the next few months of the May 06 highs around $730/oz, and later a crack at the historical 1980 $800 point. Remember though, that 1980 gold inflation adjusted to todays prices is worth well into the 000's of dollars. I wonder if this will play out....the sky is the limit
