Gold rose for the fourth day yesterday and is up some 3.5% so far this week and set to complete a very strong week. As expected, under reported and leveraged silver has outperformed gold and surged more than 12% this week. A close above $14.60/oz, could see silver again challenge recent nominal highs at $20.88/oz.

Gold’s rise in recent days has been volatile with sharp moves up followed by retrenchments and this is leading to an under appreciation of gold’s move up and a perception that gold is struggling. Some of the larger shorts appear to be engaged in a form of managed retreat. Technically, gold looks well and a close above $965/oz should see us move up to challenge the record highs at $1,030/oz. A close above the record price will likely see us challenging $1,200 possibly before year end.

Central banks are again looking positively on gold as a finite foreign exchange reserve and monetary asset and for the same reasons, investors and savers internationally are continuing to diversify into gold. Especially given the increasing risk of an inflationary spike in the coming months and the possibility of global stagflation taking hold.

The ECB cut interest rates to a record low of 1% and have embarked on the high risk gambit of the Bank of England and Federal Reserve – the money printing monetary experiment that is quantitative easing. This is leading to further anxiety regarding future inflation and the ability of fiat currencies to preserve purchasing power in the coming months.

Markets await employment data for April and a worse than expected number could see risk aversion rise again.