Gold has spent the week consolidating above the US$700 mark and the future is looking quite strong for further growth.
It spiked to USD$715 earlier in the week and has moved down to $708 currently on a slightly stonger US Dollar, profit taking and consolidation.
Current short term effects on the price:
Oil - record highs on the oil price are helping to strengthen the current position. As you can see shortages due to weather ad the middle east, coupled with depleted gasoline stocks in the US and the end of the "driving season (also known as summer) coupled with the onset of winter and a huge demand for heating oil means that oil is unlikely to drop in price by much. Gold is used as a hedge against rising oil prices.
Foreign exchange: The US dollar hit 15 year lows against the major currencies earlier this week, and a 30 year low against the Canadian dollar on Thursday. The expectation of this improving in the short term is very slim. Reasons behind the US dollar being so weak are things like very low payroll data, a possible increase in the CPI, high Oil prices, the credit crunch and a lot of people believe running a fiat economy for 30 years will eventually catch up with you.
Risk Aversion: The credit crisis is now starting to bite world wide, with the 5th largest mortgage lender in Britain applying for financial aid from the Bank of England , and possibly another Finance company in New Zealand showing signs of trouble, more and more people are getting out of the high risk sectors of the investment markets and moving towards safe haven investments.
Gold supply: With the Indian wedding season just around the corner (November to December) and Newcrest buying out its entire forward position to trade only in Spot Gold (Next weeks announcement of a possible interest rate drop
will also help bolster the upward movement of the gold price.
NZD: has moved slightly upwards this week, this has taken some of the edge off the US$ Gold price. After the announcement of no rate change on Thursday by the reserve bank, the appeal of the Kiwi dollar once again meant an upward move against the US dollar.
