The gold bull run is only 11 years old ... yet it is behaving like a teenager. That is to say that it is ignoring kindly paternal advice to consolidate at lower levels and looks to be ignoring common sense; yes, it very much has a mind of its own and it looks to be rushing headlong for a disaster. Or so I thought early this morning as gold nudged fresh all time highs of $1912.
Since hitting those new highs, gold has retraced amidst some profit-taking. In the UK physical retail market we are seeing some good two way trade at the moment. Plenty of investors still are entering the market, while others (many of whom have held their metal for in excess of a decade) are keen to take profit and head for an exit.
Where to from here? Shanghai has followed CME in raising margins on gold futures, so that should take some of the heat out of this market. That said, a gearing of about 25:1 on the futures is still quite a high level of leverage. The next big driver will be news from Jackson Hole. Do the policymakers have any sensible plans to relieve debt while maintaining some semblance of economic growth — especially on the jobs front.
Ross Norman is the owner and chief executive officer of the London-based gold broker Sharps Pixley Ltd.