Commodity Corner
Gold has most certainly been in an impressive uptrend for the last 15 years. In fact, pretty much from the point when probably the UK’s most ineffectual Prime Minister, Gordon Brown, sold almost all our stock in the late 90’s at around $250! Since his infamous “sale of the century”, gold has run from just under $300 to a record level of $1,900 last year. As a consequence of the serious growth these BRIC countries have experienced during the last 10 years, their orders for gold have certainly been making gold bugs very happy indeed, resulting in a seemingly never-ending bull market. Unfortunately, in the markets, more often than not, what goes up generally comes down as the weight of bulls in a position gets top heavy and then prices deflate...
There have been two key drivers of the uptrend and one has been the rising demand from countries like China and India which, together, represent as much as 50% of the total physical demand for the precious metal.
During 2012, gold has been absent the physical demand driver and, even though its price has risen modestly, the trend has not been as linear as in prior years. In the process, this has scared some investors given the sharpness of some of the sporadic declines. Are we approaching a peak in the gold market as this type of trading pattern typically signals, or is the trend just pausing, ready for a renewed ascent?
CHART - GOLD 10 year
92 | www.financial-spread-betting.com | January 2013