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-- Posted Sunday, 1 March 2009 | Digg This Article | | Source: GoldSeek.com
There is talk in the gold market of a ‘double top’ and evidence of climatic selling in India. But when I look at the gold chart it reminds me very much of the 2006 top and how investors got the jitters at $730. Since then we have been to $1,000 twice, and have now slipped back to the mid-$900s per ounce. The danger is getting short-term selling cycles muddled up with the long-term cyclical bull market that looks as deeply entrenched as ever. Bubble trouble? Gold might be the last great bubble of the 2000s, along with bonds which are also wilting a little now, but there is not a climatic price spike on the chart worthy of the name. Oil last year gave us a reminder of how markets behave at the extreme phase of a bubble. The doubling of prices in a matter of months was an alarming signal that should have served as more of a warning than it did for many investors. There is no such price spike evident in gold. You look at the chart and it is a gentle upward curve over the past decade with a little bouncing around in the price over the past year. Base-building That could be the volatility often associated with a price peaking, but then this is also the kind of base-building pattern often seen before a major price advance, or indeed a spike. Macro-economic conditions are not really that great for gold at the moment with deflation and not inflation evident. It has to be said that if gold can hold its own in this environment - largely as a safe haven and guarantor against future inflation - then think how it will rise when conditions change in its favor. The pumping of huge amounts of money into the global financial system by central banks is the classic formula for future inflation, and the idea that central banks will be able to successfully manage this rush of liquidity is so obviously untrue it is almost fraudulent to suggest it. Price spike The golden scenario for the gold price is thus being set up, and further problems in the financial sector and a slumping stock market can only increase the safe haven appeal of gold. A few nasty shocks could yet power gold up to $1,200 over a few trading sessions. Indeed, is there any current scenario that looks bad for gold? Even in an all out deflationary collapse gold would hold its value better than probably any other asset, and decline less in relative terms. The argument then of not to hold gold just does not make any sense at the moment, and the case for increasing investment allocation to the yellow metal, and associated assets like silver and precious metal stocks is overwhelming. That ought to keep the price up and send it higher.
-- Posted Sunday, 1 March 2009 | Digg This Article | Source: GoldSeek.com
Previous Articles by Peter Cooper
About Peter Cooper:
Oxford University educated financial journalist Peter Cooper found himself made redundant by Emap plc in London in the mid-1990s and decided to rebuild his career in Dubai as launch editor of the pioneering magazine Gulf Business. He returned briefly to London in
1999 to complete his first book, a history of the Bovis construction group.
Then in 2000 he went back to Dubai to become an Internet entrepreneur, just as the dot-com market crashed. But he stumbled across the opportunity to become a partner in www.ameinfo.com, which later became the Middle East's leading English language business news website.
 Over the course of the next seven years he had a ringside seat as editor-in-chief writing about the remarkable transformation of Dubai into a global business and financial hub city. At the same time www.ameinfo.com prospered and was sold in 2006 to Emap plc for $27 million, completing the career circle back to where it began a decade earlier.
He remains a lively commentator and columnist as a freelance journalist based in Dubai and travels extensively each summer with his wife Svetlana. His financial blog www.arabianmoney.net is attracting increasing attention with its focus on investment in gold and silver as a means of prospering during a time of great consumer price inflation and asset price deflation.
Order my book online from this link
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Plenty of Room for Gold Prices to Go Higher
