Last week saw gold prices zig-zag all over, ending slightly higher on the week. Unless some big economic news moves precious metals prices decisively, expect more of the same next week.
I’ve been getting a lot of questions this week about whether I think gold can continue its upward climb. That’s the time I have to remind my readers that I’m an analyst, not the Wizard of Oz. I’m the guy reading the charts, not the one behind the curtain pulling the levers. My best guess right now, based on the chart data, is that gold will continue a choppy but generally upward trend.
People who made purchases in late March and April may disagree with that assessment, and they have a reason to be annoyed but no reason to despair. If you have been practicing my advice to make small regular purchases and small sales into price spikes, you’ve done pretty well over the last four years. It might help to look back at the price of gold on a two year scale.
On January 30, 2009, gold was trading at $927.30 and it’s been steadily up ever since. When gold broke into the parabolic upward curve from January to April this year, there was general agreement that it was over-bought. Although looking at the prices on a two year scale, even the parabolic peaks, while high, weren’t wildly out of sync with the trend line. Adding an inflation adjustment smooths out the peaks even further.
I believe gold will continue to gain ground until some macroeconomic trends kick in to provide long-term, sustainable growth. Sustainable growth will mean that many of the organizations that have positioned themselves to siphon off cash without providing any value will have to lose their place at the easy money table.
Until that takes place, until there is a long-term, sustainable driver for growth there is no reason to shift out of a defensive investment strategy and securing at least part of your asset value with gold and silver will still be a smart play.
With the holidays coming it’s interesting to see big name retailers finally offering gold and sliver in retail packages. Because of the supply chain issues associated with retail, the mark-up is pretty steep, but the fact that big name retailers are even listing gift size gold and silver in retail packaging is interesting in itself.