What is going on with the gold price?
First of all we need to distinguish: which gold price?
You usually only hear about the US dollar gold price. It’s quoted in all the finance news bulletins. But if you’re an Aussie investor, it’s not entirely relevant. Sure it’s important, but it’s not the main thing you should be looking at.
I’m talking about gold priced in Australian dollars. This adjusts the widely quoted US dollar gold price for movements in the Aussie dollar. And thanks to a falling dollar over the past few years, Aussie dollar gold has done quite well.
In fact, in the past few days, Aussie dollar gold broke out to a new three year high. You can see this in the chart below. This is a bullish long term development and suggests higher prices in the months and years to come.
Confirming this view, many Aussie gold stocks are also reaching new share price highs, with some already up hundreds of percent from their low points.
What now for gold?
Gold, in both US dollar and Aussie dollar terms, has had a good run over the past few weeks. These sort of rallies are generally followed by some profit taking. So expect a correction in the next few days or weeks.
But fundamentally the picture looks good. An increase in risk aversion across the globe, and falling global bank stocks mean gold should continue to see money flow in for safe haven refuge. If the charts continue to support this bullish fundamental view, then the long term bear market for gold could be coming to an end.
Never assess a stock or assets fundamentals without looking at the chart too. Combining fundamental analysis with charting can yield powerful results.
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Editor, The Daily Reckoning