Further price falls are quite possible in the short term as gold works off its short term overbought state. However, the primary driver of gold prices in recent months has been investment demand (especially institutional, hedge fund and central bank) and this demand is not going to disappear anytime soon – especially with increasing concerns regarding the outlook for fiat currencies. $1,200/oz to $1,300/oz remains a viable price target by year end.
October is nearly over and it is traditionally not the best month for gold with short term correlation with equity markets often seen. September, November and December are traditionally stronger months for gold. Western holiday jewellery demand kicks in late in the year for Thanksgiving and Christmas and significantly Chinese New Year, which is increasingly important on the demand side at the end of the calendar year. These important demand factors normally result in gold’s strongest performance in September and in the early winter months of November and December.
Markets await advance Q3 GDP and Initial Jobless Claims and disappointing figures should support gold with a safe haven bid. In EUR and GBP terms, gold is trading at €700/oz and £628/oz respectively and has remained strong in these currencies as the dollar has strengthened against falling euro and sterling.
Silver is currently trading at $16.31/oz, €11.09/oz and £9.92/oz. Silver as usual has fallen by more after rising by more. It is vulnerable to further correction but remains a strong buy for the medium and long term.
Platinum Group Metals
Platinum is trading at $1,317/oz and palladium is currently trading at $319/oz. Rhodium’s fundamentals are very interesting and various analysts are of the opinion that rhodium could rise to over $5000/oz in the coming months. It is worth remembering that rhodium was trading at $10,000/oz some months ago. It is now trading at $1,950/oz.
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