While the dollar dropped to a two-and-half month low against the euro yesterday, gold closed at a fresh two-and-a-half month high at $945.30 per ounce. Near-record oil prices, geopolitical tensions in the Middle East, and the continued weakness in the dollar have fueled gold’s latest rally.
Gold’s strength has caught me by surprise recently, as I expected it to remain in a trading range and retest the $850 level. But as strong as it looks short-term, now is not yet the time to get aggressively long. Reason: July and August are seasonally WEAK months for gold and gold shares.
Once I get the signals, my next target for gold: $1,250 an ounce.
Long-term, the fundamentals that have driven gold higher are firmly in place and keep telling me that prices must climb to an equilibrium level of $2,200 or better. Soaring demand, declining supply, surging oil prices, the declining dollar, profligate money printing, and hyperinflation all point to much higher gold prices.
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- Gold: Physical Demand Soars (09/25/08)
