The action in precious metals lately has been impressive. Silver and gold caught a bid amidst the chaos in currency markets and bank balance sheets. The nervousness has created an atmosphere of fleeing away from equity in to safer havens. With gold seemingly gaining steam to make another move to the upside, is $1000 within sight?
Markets tend to discount the here and now and focus on the future. Has gold already priced in potential inflation or is that a variable being gauged on a daily basis? Options traders in GLD would suggest that $95 to $100 (or around 950-1000/oz) are reasonable price targets given their usually large call positions.
Charting the course
Right now $1000 is resistance long term, without some extraordinary volatility to the upside. Below is a three year, weekly chart of GLD. The bollinger bands are a great indication of potential support and resistance in price moves. We’re using a longer term chart to get a very broad view of GLD’s price action over the last 150 weeks.
While past performance is no indication of future gains, GLD has outperformed the SPY (S&P 500) consistently for quite some time. Gold has always provided a safe haven for value. For thousands of years, gold has had the same purchasing power.
It is wise for investors with long term objectives to have some precious metals exposure in any portfolio as a hedge against inflation, which is expected to increase significantly in time. Traders may want to be more aggressive playing the rally depending on your strategy.