GS: Gold, Silver, Oil, Copper, USD: End of the Run or Just the Beginning?
Last Month has been a very good one for the Gold and especially the Silver community, both prices went up nicely. Silver registered its biggest monthly gain since 1987, rising by 27%.
It looks like more and more people are beginning to see the light. Although most of the gains are said to be explained by the recent fall of the dollar, this is not entirely the case. Gold is also rising in other currencies, albeit at a more modest pace. Nonetheless it is rising. The inverse relationship between the Dollar and Gold is still an important factor to keep in mind but we have to look at it with a broader perspective.
More and more institutions and Central Banks have increasingly shown interest in adding Gold to their reserves, not only as a safe haven for the falling greenback but also as a hedge against future inflation expectations. This interest will be a driving force behind the future rise of Gold in all currencies and makes it one of the safest investments for the coming decades.
As far as the “poor man’s Gold” (Silver) is concerned, last month has shown the enormous potential that investing in Silver presents versus Gold. While Gold rose by almost 10% last month, Silver added 27 percent. Will Silver keep outperforming Gold? I think so, because Silver doesn’t only have a correlation with Gold as a safe haven, it is also used as an industrial commodity.
The outlook for Gold is very promising. The breakout from the flag pattern and the possible reversed Head and Shoulders pattern paint a very rosy picture for the upcoming month.
The “only” hurdle that could spoil this positive outlook is a potential double top around the $1,000 mark. We can expect some resistance at this level because it is the last chance for the bears to launch a significant counter attack, there last line of defence so to speak.
A break to new highs will invite more investors to join the party and will thus trigger a new flow of fresh money to push Gold higher. The technical conditions are all set and ready to go. We are in for an interesting month.
