By Michael Bogan
The gold price hit a record high in U.S. dollars, reaching an intraday high of $1,252 in early trading on the NYMEX, Tuesday, before closing at $1,245. Gold continues its march higher despite analysts’ concerns of its recent move higher to be overextended, while some analysts call the gold market an outright “bubble.”
Other analysts disagree, however, pointing to a relatively low bullish reading of 73% of gold analysts surveyed during this recent run to a new high, according to Market Vane, with data also showing previous intermediate-tops coincided with much higher bullish sentiment readings.
Previous gold bull markets have been characterized by higher gold share prices prior to a bull move in the actual metal. But shares of major gold producers such as Australian-based Newmont Mining (NEM) and U.S.-based Barrick Gold (ABX) lag the recent surge in the price of the underlying metal. As of the close of Tuesday’s trading, the Market Gold Vectors Miners ETF (GDX) is down more than 9% from its December 2009 high.
The bulls maintain that the longstanding relationship between the major gold mining shares and the price of gold bullion is no longer reliable, as the recent introduction and convenience of buying gold through an ETF (NYSEArca: GLD) was not available to retail investors prior to 2004. Prior to the advent of the gold ETF, investors not willing to hold the physical metal, unable to plunk down thousands of dollars on a futures contract, or too skirmish about negotiating the rollover of futures contracts prior to expiration, can now can take a position in gold like they can any stock.
With the recent inventory statistics available through SPDR Gold Trust (GLD), the ETF now holds more than 41 million ounces of gold, or $50.2 billion worth. Open interest in the options market has raised as well, suggesting a confirmation of interest among the investor public to own gold is on the rise.
Once again, worries of a possible global meltdown are the catalyst for the latest record high in gold, with previous record highs achieved brought about for similar reasons but from different troublesome spots within the interconnected global community. This time, concerns of a devalued US Dollar have moved across the Atlantic to Europe and its currency, the Euro.
In its morning piece to investors, CIBC World Markets said about the strength of gold, noting that, “While we have pointed out time and again that the gold price is not always strictly dependent on U.S. dollar movement; the most recent decoupling (due to the European debt crisis) is nothing short of breathtaking. The U.S. trade-weighted dollar is up 12% YTD while the gold price is up 14%.”
Bullish analysts have noticed a trend in the ongoing bull market in gold. That is, each time the ongoing global debt crisis ameliorates in intensity, gold pulls back and consolidates for a period until the next crisis jettisons the ultimate safe-haven investment to a fresh record price.
It’s “a two steps forward and one step back gold market, which is the healthiest of all bull markets,” global markets analyst Peter Grandich said to Goldseek Radio on Friday. Grandich says gold is in a powerful secular bull market, and he remains “very, very bullish [on the price of gold.]”
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