Gold surges past $1,360… how high can it go?

Yellow metal records another record price rise in yet another session

Spot gold prices hit a fresh record of $1,362.58/oz this morning, the ninth record in ten sessions for the yellow metal. The shiny metal continued breaching new high records for the third consecutive session taking advantage of concerns surrounding global recovery, which raise speculations that central banks around the world will add to stimulus to bolster growth.

Demand from Asia, especially India amidst festival season that started in September and will end in November, is expected to keep prices buoyed up.

Earlier this week, Bank of Japan surprisingly lowered borrowing cost to a range between 0 and 0.1 per cent, and said it would establish a new fund to gather ¥5 trillion to be used for purchasing government bonds as well as other assets to boost the economy.

The unexpected intervention increased the possibility of having similar interventions from other major central banks where the US Federal Reserve is expected to be the next.

Accordingly, the predicted intervention, especially amid the bleak data released recently, is weighing on the dollar and causing it to become weaker. The dollar weakness is also pushing up the price of black gold, with a barrel of Brent crude oil trading above $85 for the first time on five months.

Gold is seen a safe investment as countries look to boost their economies by using monetary policy to increase liquidity and cut borrowing costs.

Silver prices at $22.38 are trading near their 30-year highs while spot platinum is trading at $1,715.70, the highest level since May. Among other precious metals, palladium edged up to $592, a nine-year high, from $588.20. Copper, which has a variety of industrial usage, is at a two-year peak.

Precious and other metals have been scaling new records almost on a daily basis, with a section of analysts now voicing their concerns against their meteoric rise. “They’re going up too much, too soon,” said a Mumbai-based trader who said that record prices were bound to impact retail sales and, therefore, demand in the coming weeks.

However, a number of others disagree. “The silver price could reach $24.50, the gold price $1,375, maybe more. Already these rises are crazy, with new all-time highs day after day, but crazier still is to come. We are still at the early stages of the bull market’s big rises. The very early stages,” Franklin Sanders of writes in his blog.

Experts maintain that gold and silver remain in a bull market, and with the current economic climate favouring safe haven investments, they would continue to rise as demand picks up further.

In spite of the fact that the talk of a gold price bubble have escalated ever since the metal crossed $1,300/oz, the current level of bullish sentiment suggests that there is still some steam left before gold prices stop their ascend.

The latest Hulbert Gold Newsletter Sentiment Index, which measures recommended market exposures by gold timers, came in at 59.2 for the third consecutive week while Market Vane’s bullish consensus reading stands at a little over 80 per cent, with figures above 90 per cent usually setting the stage for the beginning of any meaningful correction.

Moreover, the numerous price records are being complemented by record transactions, with the Dubai Gold and Commodities Exchange (DGCX) announcing that its September volumes were up 63 per cent year-on-year and 41 per cent month-on-month.

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