After trading downwards for more than 4 years, gold prices have broken out to the upside with a gain of 20% off the December lows. Gold bulls can be unpredictable and shifty. So far, gold has rallied around 22% from a low over a period of a few weeks. The financial establishment's bearish consensus as reported in the Wall Street Journal has so far proven to be dead wrong. Demand for the yellow metal is rising in 2016. If the prices rise to new record highs, it will be because of a tightness in supply and strong physical demand.
Never actually traded the gold market with a view to making money off of such trades, but I do have gold in physical reserve. There's way too much going on to predict what way its price will go for me to be confident I could profit from it. I kinda think gold is a unique commodity, one which requires some fairly expert knowledge to do well with it.
At $1,232.12 an ounce, gold has dropped from its highs of 2012, but it's nowhere near the lows of Brown's Bottom (when Gordon Brown sold off the UK gold reserves at $282.40 an ounce). There are demand factors pushing it up: with all the instability, including a possible Brexit, many investors are going to look for somewhere secure to hold their funds and gold has a reputation for being safe. On the supply side, with the problems in mining shares over the last few years (Remember LonMin, anyone?) and AngloAmerican now cutting its CEO's pay, prices could well be partly driven by a supply issue. If people bought gold futures, and the miner failed so the gold was never produced, it would produce the effect of scarcity. I don't actively trade gold, but I do hold a tracker as a hedge. With the current market volatility, I wonder how many other people are doing something similar.
Weakness in $ is 1 of the reasons, Gold is Bullish and Technically Gold is Bullish also. In future, Rate hikes and Rate cuts will decide future of Gold. 2016 is Bullish for Gold, no doubt about that.
