After Big Break-Out, Gold Is Flat Today. Is There More Room To Run?
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UPDATE: After breaking out to all-time highs yesterday, Gold traded just slightly higher today. Spot Gold last traded at $1044.60, versus yesterday's close of $1041.80.
Investors are flocking to gold as the new 'world currency' due to dollar weakness, rumblings that foreign countries want to move away from dealing in dollars and yesterday's surprise move by Australia to raise its key interest rate - making it the first major country to do this.
The raised interest rates in Australia suggests that all the stimulus pumped into the system could be starting to shows signs of being inflationary.
Currently we are in a deflationary spiral, but if inflation does start to kick-in, it could come with avengence and become unstoppable by any central banker. Gold buyers know this and are positioning in the yellow-stuff ahead of this event.
Traders are pointing to the inflation-adjusted high of around $2300 as a "realistic" price target for gold. But the trade may be to stay in gold until the U.S. Federal Reserve tries to get ahead of the curve and starts raising interest rates. This will not likely happen until mid-2010. So despite its recent run, gold may still be a good bet for some time to come.
Many have been gaining exposure to gold through ETF SPDR Gold Shares (NYSE: GLD) or through the miners as represented by Market Vectors Gold Miners ETF (NYSE: GDX), which seeks to replicate the price and yield performance of the NYSE Arca Gold Miners Index. Top holdings of the index include Barrick Gold (NYSE: ABX), Goldcorp (NYSE: GG), Newmont Mining (NYSE: NEM), Kinross Gold (NYSE: KGC), and Yamana Gold (NYSE: AUY). There is also a new gold ETF - ETFS Physical Swiss Gold Shares (NYSE: SGOL) - that traders are starting to use.
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