At press time on Monday, the spot price of the yellow metal was $2,723 per ounce.
The new milestone comes less than a month after gold first crossed the $2,600 mark. But also less than two months after the first touch of $2,500. At the beginning of the year, the price was $2,063 per ounce.
Analysts mainly cited well-known reasons for gold's impressive performance. Such as the desire for a «safe haven» in the face of geopolitical turmoil (including the US presidential election). But they also noted that state banks, especially China's, are massively increasing their gold assets.
«China saw what happened in Russia, where the dollar was used as a weapon.» As he says in JCK Campbell Harvey, a professor at Duke's Fuqua School of Business. «Given China's geopolitical ambitions, it makes sense for it to exercise some risk management..... But for China to wean itself off the dollar, it needs to find another safe asset.
«A logical choice for this safe asset is gold. Therefore, China is increasing its official gold reserves. The expectation that it will continue to do so is driving the gold price up. Simple supply and demand economics. Supply is constrained, demand is increasing but the price is also increasing.».
Jim Wyckoff, senior metals analyst at Kitco, says in JCK that the Federal Reserve's decision on 18 September to cut interest rates by half a point, followed by the European Central Bank's rate cut, added fuel to the fire that was already raging. Lower interest rates have historically been bullish for gold prices.
Still, Wyckoff says this is a «very mature gold bull market.» Which could signal that it is «near the top».
«Right now the charts still favor more bullish price potential,» he says. «The gold price will peak at some point, and more suddenly than people expect.».
Wyckoff believes gold will eventually reach $3,000 per ounce - he just doesn't know when. «Sometime in the next decade, I can say in confidence that gold prices are likely to exceed $3,000,» he says.
Adds Harvey: «Gold is a volatile asset. Its volatility is about the same as that of the S&P 500, about 15% per year. That means its price can go up or down dramatically. It is naive to think that because the gold price has moved up over the last six months, it will continue to move up.».
Source: jckonline.com
