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Vancouver – Gold’s biggest believers are beginning to have some doubts.
Many investors focused on gold seem certain that gold, which closed at a record $1,891.90 (U.S.) on Monday, will crack the $2,000 mark. But market bulls said they are preparing for a sharp decline of several hundred dollars, possibly very soon.
The ascent of the precious metal, which marked its third consecutive record high on Monday, has gone “parabolic,” with the price increasing exponentially, several analysts observed.
“Parabolic price surges … are not something with which an economist is particularly comfortable, unlike hedge-fund managers and short-term traders,” said DundeeWealth chief economist Martin Murenbeeld in a report to clients.
“Nothing goes up in a straight line. I suspect that there is one hell of a correction to this most recent surge in the not-too-distant future.”
Gold (GC-FT1,877.60-14.30-0.76%) has climbed for 11 consecutive years and the pace of the rise has rapidly increased. Bullion is up nearly one-third since the start of July and, based on the past 13 weeks, is rising at an annualized pace of about 110 per cent. That compares with a climb of about 50 per cent in the past 52 weeks.
Much of the increase this summer can be attributed to anxiety about the global economy. The future of the euro as a currency was even in doubt, with investors questioning the health of such bulwarks as France. And the United States was mired in a political crisis about its debt and subsequent rating downgrade by Standard & Poor’s, sparking major stock-market declines.
As a result, some investors are seeking a haven in gold. The number of shares of exchange-traded SPDR Gold Trust, for example, have increased 7 per cent since July 1.
On Monday, gold rose 2.1 per cent, or $39.70, to $1,891.90 per ounce, as measured by the most actively traded futures contract, for December delivery, on the New York Mercantile Exchange. During the trading session the contract came within six dimes of $1,900. Monday’s gain comes on top of a 6.3-per-cent increase last week, gold’s biggest week since the depths of the financial crisis in early 2009.
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