Gold Reaches 11 Month High; $1800 Next
| by Michael Locklear
October 4, 2012 – Gold prices reached their highest level since last November today, fueled in part by the announcement from the European Central Bank that they would continue to keep interest rates in the eurozone at current near zero levels. The market now appears to be set to break through the psychological ceiling of $1800 per ounce.
Jobless claims for the week are up 4,000 reaching 367,000 for the period ending September 29. These numbers are a day early and investors are still waiting to see the non-farm job report due out tomorrow. These numbers have had significant influence on the price of gold in previous months and continue to impact the market’s reaction to the economy. Since these numbers reflect the likelihood that the Federal Reserve will continue its recent monetary easing plans to further improve US job numbers they’re likely to continue influencing gold buyers who are seeking shelter from the threat of inflation.
The president of the European Central Bank said today that they are prepared to move forward with plans announced last month to buy government bonds as soon as Spain and Greece complied with requirements to create conditions suitable to receive aid from the ECB. Additional easing actions would create an impetus for investors to buy more gold since it would indicate a likelihood of increased inflation in the euro zone.
In another announcement the Bank of England said today that it would keep its near zero interest rates unchanged in the immediate future. Analysts see this as a major push for investors to move more money into gold. Market watchers continue to see $1800 per ounce as a resistance barrier in the upper price levels. However most experts agree that the market will breakthrough that barrier very shortly, in fact it’s believed to be imminent. Analysts are encouraged by Gold’s recent rally that the breakout above $1800 per ounce will occur in the very near future.
The spot price for gold today is at $1792.40 per ounce. We have seen three highs recently in the lower range of the $1790s as investors flirt with a commitment to go above $1800 however they still remain resistant to taking the plunge. It does however now appear that investors may get over their cold feet and are about to take the leap over the $1800 barrier. The question is not if but when this breakout will occur.
Some analysts are predicting that the new gold price ceiling will shortly be $1815 per ounce. Tomorrow is the US non-farm payroll numbers will most likely be a strong determining factor on when the breakout beyond $1800 will happen. In view of the Federal Reserve’s promise to focus intensely on unemployment numbers and to aggressively pursue monetary easing in order to impact job growth in a positive way weak job growth will only serve to fuel a drive by investors to put more money into the gold market as they seek shelter from inflation. Meanwhile investments in gold exchange traded funds continue to increase. Gold remains very strong as new money continues to flow into the market.
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