Welcome to 2008. And we've started the year off with a bang. The gold price has increased by over USD$25 since Christmas, breaking the magic high of $850 quite convincingly off the back of oil pumping through the historic $100/barrel mark.
In the last 24 hours......The gold spot price was choppy in trading last night, peaking at above USD865/oz before slipping lower again as oil prices declined. The gold price is showing to be quite strong at the upper end with the ongoing strength maintaining the upward movement.
Of note, the Shanghai Futures Exchange will begin trading gold futures contracts from 9 January.
Crude oil prices fell sharply in overnight trading to around USD95/barrel. The drop in oil prices occurred quickly but it is hard to identify a specific reason. Continuing worries about the US economic outlook and the anticipation of mild weather conditions (relative to normal) in the US north east may have helped prices.
There were news reports that five Iranian boats made aggressive manoeuvres against three US navy ships in the Strait of Hormuz but these did not appear to have a lasting impact on oil prices.
CNN article"We had some profit taking pressuring gold lower but sentiment is still very positive for the next two to three weeks, because the dollar is expected to weaken further and we are seeing fresh inflows of asset reallocation in precious metals," Frederic Panizutti of MKS Finance said.
The dollar rebounded versus the euro on Monday as investors feared high inflation pressures in the US may prevent the Federal Reserve from cutting interest rates again at the end of the month. A stronger dollar makes gold more expensive in other currencies, therefore discouraging buying.
"The gold market is closely watching the euro and crude for direction at the moment. For the bull run to continue in the next week one of the two must continue to show strength. If not, expect to be trading the range with resistance at $869 and support at $855 for now," broker Macquarie said.
Recession in the US 2008? According to this Bloomberg article the odds are better than 50/50 that we'll see a recession in the coming year.... If a recession eventuates, or even if the US economy simply remains weak, it should translate into support for gold as investors seek a safe haven.
Hoping Santa left you one of these.....
24Ct Gold nokia 8800
