Gold is outperforming equities in the chaos

Gold is outperforming equities in the chaos

Well, we have survived another week of turmoil in market - one of the most dramatic ones ever. By now you might think that we can handle these traumas without becoming too concerned as we usually seem to recover once the panic subsides, but they are still disruptive.
However, it is not as simple as saying what goes down will come back up again. Many investors have had the bejesus scared out of them so it will take a while before the more conservative guys come back, but there will be plenty of trading opportunities afforded by the volatility.

The performance of gold requires a special mention. At first it seemed that gold was being sold down along with everything else but as the week progressed it not only recovered nicely, but it broke to a new high of US$3,2360/oz (A$5,147/oz). As they say, it was as strong as 10 men! That strength caused a number of our listed gold producer share prices to hit new highs as well.

How much further can the gold price go? The closest analogy to what we are witnessing now is the 1970s lead up to the peak of US$800/oz in early 1980. Back then the US$800/oz peak was a blow-out event. If the current bull market gathers momentum and starts to move circa US$500/oz higher in a day or two, that would qualify as a blow-out event and the market will be peaking. While the maximum movements are $50-$100 per day i.e. 3-4% movements, that will be symptomatic of a strong bull market. It will suck more traders in to the game but it will still be rational.