The day gold surged past the $400(US)-mark last week was the day a Toronto stockbroker placed an ad in a financial newspaper for a seminar on “how to profit from the recent gold price moves.”
It was a timely bit of marketing.
“We’ve been swamped with calls,” said Edward Chateauvert of Walwyn Stodgell Cochran Murray just hours after the ad appeared.
Gold, with a London morning fix Sept 3 of $407.20, hasn’t been higher in U.S.-dollar terms since early 1984 and other precious metals have been performing as well as or better. Platinum in particular has been volatile climbing to $665 Sept 3, its highest level since 1980.
As far as gold goes, it’s the “little people” who are starting to take it seriously again as an investment and that alone indicates that price increases could continue for some time. Combined with the bullish opinions coming from analysts and other professional investors and traders, this bull market appears to be for real.
Much of the platinum price increase is related to South Africa’s pre-eminence as the world’s producer of the industrial-precious metal. As the source of 80% of Western World’s platinum fears that political problems in South Africa could result in a disruption of supply has fuelled much of the increase in platinum group metals.
That has helped gold sustain its climb. “I would only say we’re very, very bullish,” says Mr Chateauvert declining to predict an increase in the gold price to the thousands of dollars although the Walwyn ad features the caption “Gold $2000?” in bold type.
He said gold should be at about $415 today in order to “keep pace” with the gold price in Japanese yen, German marks and Swiss francs. Because of the weaker U.S. dollar, the price for gold in the U.S. currency converts to a 10-year bargain in many other major currencies.
Even the usually cautious traders at Guardian Trust seem fairly convinced of gold’s current strength. Platinum’s more dramatic increases, from less than $400 earlier this year, have them looking for a downward correction.
“Emotions are pushing the platinum price,” says one of the Guardian traders cautioning that “huge bouts of profit taking” could force the price down somewhat in the short term.
“The others look fairly solid,” he says referring to gold, palladium and silver. Palladium in putting in a stellar performance recently climbing to over $150 from less than $100 in early 1986 while silver has been tagging along adding about half a dollar since bottoming out at just under $5 earlier this summer.
Richard Cohen, an analyst at Bache Securities, says gold is “a technicians’ market right now.” Having broken through the $400- barrier, technical analysts who base predictions of future prices solely on past performance as indicated in price and volume charts are revising their predictions.
According to the technical analysts, gold has broken out of a long downward trend. They too see a bull market opening.
But Mr Cohen adds that analysis is usually much better after the fact. “Gold is one of the most difficult metals to predict,” he says. In a few months from now analysts will be able to look back and see more clearly what made the market move the way it has for the past five weeks since charging through the $350- level Aug 1.
“In the absence of inflation, what’s propelling gold to these price levels?” he asks. “Is inflation coming back?”
Despite his unanswered questions, “gold remains the best looking investment of all the metals we follow.”