GOLD PRICE NEWS - The gold price rallied 2.6% to a new all-time high of $1,233, as the price of gold continued to benefit from skepticism over Europe’s ability to tame the sovereign debt crisis. With today’s gold price advance, the price of gold has climbed 4.6% in May, and 12.6% year-to-date.
The gold price finished the previous decade as the top performing asset class in financial markets, and has continued along a similar path in 2010. Most broader-market indices have posted modest gains year-to-date - with the Dow Jones Industrial Average (DJIA) higher by 3.1%, the S&P 500 up 3.5%, and the NASDAQ composite rising 4.7%. Cyclical commodities have fared worse, with the price of oil lower by 3.8% and the copper price down 1.5%. The silver price, however, has outpaced the gold price in 2010, with a 14.8% gain. The primary catalyst behind silver’s strength has been its role as both a precious metal that benefits from currency debasement, and as an industrial metal tied to the global economic recovery. The price of silver finished the day higher by 4.7% at $19.35 per ounce - its highest level since March 19, 2008, amid the Bear Stearns crisis.
Tuesday’s strength in the gold price came amid another rally in the U.S. dollar, as the euro fell 0.8% to 1.2694 against the greenback on the heels of further uncertainty over the structure and implementation of the $1 trillion European bailout plan. Investors and traders have sought out the safety of gold, with central banks across the globe continuing to turn to currency debasement to deal with financial and economic challenges. This increased investment demand for gold was further illustrated by a report that holdings in the SPDR Gold Trust (GLD), the largest exchange- traded fund backed by gold bullion, rose 3.65 metric tons to a record 1,192.15 tons. Physical gold holdings year-to-date have climbed 5.2%, as the GLD remains one of the most liquid investment vehicles for exposure to the gold price.
With the price of gold breaking out to a new record high, investors are eyeing where the next gold price target may lie. Analysts at two Wall Street firms provided their respective answers to this question in recent research reports. JPMorgan Chase & Co. wrote that investors should expect higher commodity prices in the “near term,” and that the gold price may average $1,250 in the third quarter of 2010. Tobias Merath, head of commodity research in the private banking unit of Credit Suisse Group AG, predicted the gold price will trade between $1,250 to $1,350 by the end of the third quarter of this year.
While the next gold price target is anyone’s guess, as many well-respected investors - including John Paulson, Marc Faber, Jim Rogers and Eric Sprott - have stated in recent months, the fundamental backdrop for gold remains quite favorable.
