What’s the Worst Thing for Gold Bugs?

A gold rally. The yellow metal hit an 18-year high this morning. Silver is also up, and copper reached an all-time high.

Many metals analysts have said a $500 gold price is a matter of when, not if, as invesors show an increased appetite for commodities and hedge their portfolios against inflation. See related story.
Gold for December delivery briefly touched $479.60 an ounce Monday on the New York Mercantile Exchange, before closing at $478, up 30 cents at its highest ending level since December 1987, according to monthly charts.
Mining and metals continue to wrestle with “severe inflation/growth jitters,” as well as “supportive underlying commodity fundamentals,” said John Hill, an analyst at Citigroup.
At the same time, “some traders and metals analysts have become somewhat less bullish on the metals,” said Dale Doelling, chief market technician at Trends In Commodities. That’s a surprise given “that the metals have been able to continue their move higher in spite of the dollar’s strength,” he said.
The dollar gained against the euro Monday as resolution of the uncertainty surrounding who will be Germany’s chancellor wasn’t seen as a sure path for passage of the economic reforms some see necessary to recharge that nation’s — and the euro-zone’s — economy.

On CNBC, Jim Grant said that gold’s great advantage is that, unlike central bankers, it’s mute. He said that bonds priced in euros are overpriced, and the financial markets are simply diversifying.

Posted by on October 10th, 2005 at 2:30 pm


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