The mass panic caused by the debt and economic crises has made the price of gold rocket sky-high. The entire world is still concerned about whether gold prices turn out to create another price bubble.
Is the “gold collapse” possible in the near future?
In summer 2005 a troy ounce of gold cost about$440. Today the price is 3,4 times as big. Such an increase cannot but suggest: Maybe this is the best gold can do? Maybe the prices will start rapidly falling down? The similar picture could be seen in the crude oil market in 2008.
However, everything is not that bad. The current situation is different from the one that was seen 3 years ago. Taking into account the growing inflation pressure and the current USD exchange rate, gold hasn’t still reached its all-time price record of 1980. The situation with crude oil was different: the prices grew in early 2008 and started falling after breaking above the high while being pressed by inflation. Gold well may face the same situation but anyway it is better to wait until the prices break above the record level of $1945 per troy ounce.
The second aspect that raises concerns is the pace at which the gold price keeps growing. It is comparable to the price hike in the crude oil market before the collapse. Having considered the situation that took place 5 years ago it is possible to understand that the end was quite logical. By the moment of the price collapse crude oil had already grown in value by 340%. So far gold has gained only 150%. Probably it is not in a hurry to follow the path of crude oil.
Another key point is the correlation between the prices on crude oil and gold. It hasn’t reached its limit as well. It is not a secret that both the assets are used to ensure against inflation. Consequently, they are correlated with each other. For the last couple of decades the ratio of gold and crude oil prices has been around 15.4. From 1986 till 2000 crude oil was growing in value faster than gold. The ratio was above the average. In August 2008 crude oil made a price sharp collapse while gold kept growing in value – the ratio exceeded the average level once again. Since then both crude oil and gold have been growing in price against the background of global economy recovery while the ratio has been below the average.
Having considered the above-mentioned we can conclude that in the near future gold will stay a “safe heaven asset”, which cannot but reassure investors.
At this point the futures contract of gold (GC) continues its rally. It has already updated another local high. The closest support level is located at $ 1520.0 per ounce.
The Department of Volume Analysis of
