GOLD BROKE THROUGH its all-time high of $2,060 an ounce at the end of last week, and, in the process, exploded above an important trend line, as can be seen in the accompanying graphic.
Since we are in uncharted territory, it is difficult to say whether this was just a flash and it will ease back down or whether it could lead to 'blue sky'. The gold bugs, who have been remarkably quiet over the recent past, had some months ago been touting an absurd $4,000 an ounce and, more reasonably $2,100 an ounce, which is certainly within sight.
So, what's causing this wild ride? Historically, gold and the dollar had an inverse relationship, and gold shooting up would sometimes be an early signal of a dollar decline. Between 2002 and 2016, the DXY and gold had an inverse correlation 85% of the time; since 2016, however, this negative correlation has fallen to 73%, indicating that the link has weakened.
Some analysts see the current gold surge as a sign that the dollar may collapse-and while that may still happen, my sense is that there are some other elements at play.
Another argument is that gold rises as a store of value when other investment avenues become less attractive.
Esta historia es de la edición December 07, 2023 de Financial Express Mumbai.
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Esta historia es de la edición December 07, 2023 de Financial Express Mumbai.
Comience su prueba gratuita de Magzter GOLD de 7 días para acceder a miles de historias premium seleccionadas y a más de 9,000 revistas y periódicos.
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