In This Issue
Gold continues to dominate
The week opened with a bang as the gold price shot through the US$1,450/oz barrier and the Dow went into free fall. Gold kept rising in subsequent days, punching through the US$1,500/oz level while the Dow vacillated.
Why should gold be so strong? There are plenty of suggestions, including the impact of low (or negative) interest rates and growing geopolitical uncertainty that we are witnessing. However, the bottom line seems to be that it is no longer an argument, but a consensus. Enough people are singing the same tune and the amount of gold available to trade is much less than it was 10 or 20 years ago, relative to the total supply of money. As far as producers are concerned, there isn’t much incentive to sell gold forward due to the low contango. So in the absence of co- ordinated selling promoted by the Fed, there isn’t enough gold to go around at low price levels. Hence the surge.
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