Far East Capital Newsletter
Gold punches through US$1400/oz and A$2,000/oz
22 Jun 2019

In This Issue

Gold punches through US$1400/oz and A$2,000/oz

Our markets continue to power on to higher levels, most notably the All Ords and the Mining indices. Iron ore prices are strong, as is the gold price. The oil price is breaking higher. Interest rates are trending down. The threat of war isn’t worrying investors. Everything seems to be going well.

Like we said in January, gold was going to be the commodity most likely to offer trading profits in 2019 due to the uncertainty of global geopolitics. On Wednesday night the gold price did what everyone was wanting it to do - it punched through the US$1,350 level and as a natural consequence virtually all the gold stocks surged in Thursday’s trading. That was a great result. It held these levels and surged higher on Friday night, pushing through the US$1,400/oz barrier for the first time since September 2013.

This time is is easy to find the cause; the escalating tension between the US and Iran, while the prospects of interest rate cuts adds a bit more substance to the story. Chartists are calling this a major breakout and they are looking for moves to higher levels, but as investors you will need to stand back and factor in what the aggressive traders are doing and when they will take profits. Expect volatility.
It’s the gold producers that will do best out of this run, as opposed to the hundreds of junior gold explorers. Maybe these waifs will be able to raise money now to prolong their existence, but if they all do this at once it will kill the small end of the market. 

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