Many of you likely rubbed your sleepy eyes in disbelief when you saw gold prices breach $1,675 an ounce in early trading, but you weren’t dreaming. Gold danced above $1,675 into the wee hours of the night before settling in at $1,663.45 (at the time of this writing this afternoon).
Since pulling back to $1,487 an ounce on July 1, gold has surged nearly 12 percent. Over the past 10 years, gold’s normal volatility has been about 15 percent, so we’ve seen nearly a year’s worth of price movement in just 34 days!
Does this mean we’re due for a correction? Possibly. Gold could easily correct 5-10 percent, but given today’s current environment, I don’t think that’s what the crystal ball reflects.
Gold markets are clearly being affected by the Fear Trade. CNBC host Carl Quintanilla told me this morning that this run is “obvious to anyone who’s watched markets over the past few months.”
First, we were subjected to the antics on Capitol Hill surrounding the debt limit. Though the resolution wasn’t enough to knock America’s debt rating from its AAA pedestal, the market didn’t digest the news very well. Bloomberg screens are red with uncertainty.
Second, a slew of poor economic data is signaling the U.S. is weaker than many, including our team, originally thought. Our Ralph Aldis said yesterday, “We can’t grow our way out of this because there’s no growth.”
On CNBC and Mineweb, I provided my insight on recent gold developments today that I think you’ll find useful. The first is a podcast discussion on gold and the current opportunity in gold stocks with MineWeb’s Geoff Candy. You can listen here. We discuss gold’s key drivers and calculating value among gold miners.
I also appeared on CNBC’s “Squawk on the Street” to discuss what’s driving gold. You can watch below.
Frank Holmes,for The Daily Reckoning
P.S. For more updates on global investing from me and the U.S. Global Investors team, visit my investment blog, Frank Talk.
Frank Holmes and the co-managers of the U.S. Global Investors Global Resources Fund (PSPFX), Evan Smith and Brian Hicks, participated in a special webcast for the Peak Advisor Alliance last week. Here are some candid portions of the Q&A:Q. How are interest rates currently affecting commodity prices?A. The magic number for real interest rates is […]
Frank Holmes is chief executive officer and chief investment officer of U.S. Global Investors Inc. The company is a registered investment adviser that manages approximately $2.08 billion in 13 no-load mutual funds and for other advisory clients. A Toronto native, he bought a controlling interest in U.S. Global Investors in 1989, after an accomplished career in Canada's capital markets. His specialized knowledge gives him expertise in resource-based industries and money management. The Global Resources Fund was also Morningstar's top performer among all domestic stock funds in the five-year period ending Dec. 31, 2006.
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