Thursday, September 23, 2010

Gold may reach cyclical peak within 12 months - Jeff Christian


The price of gold is booming and expectations are it will remain strong into Q2 2011 but Jeff Christian does not believe we are going to see a repeat of the 1980s.

Gold has broken through its all time high in five consecutive sessions and is coming perilously close to the psychologically important $1,300 per ounce level.

And, while sentiment and the trend remain strong, Jeff Christian, MD at the CPM Group believes we could see a top to this move in the next 12 months.

Speaking to Alec Hogg on a Newsmaker podcast, Christian said, "I think the price is going to be strong from now into December or the first quarter of 2011. But we think that if you go out 12 months from now, if the expectations of the economic and financial markets have improved, you could see a marginal reduction in investment demand, and that could lead to a sort of rounding top in the gold price."

He does not, however expect a repeat of the 1980s where you saw, he says, "This big capitulation spike up and then a gigantic blow-off,"

Instead, he expects the gold market to reach new highs and then move sideways to slightly lower.

Asked his views on what is currently driving the market, in light of the further bout of quantitative easing that is expected, Christian says, that is one element but, is only one part of a bigger package.

"The real one-up in gold prices started I guess last week, when the Bank of Japan intervened against the yen. Gold is the ultimate safe haven investment, but what we've seen in the previous several weeks or month or so was a lot of investors were treating the yen like gold, so they were moving into the yen as a safe haven.

"When the Bank of Japan came in and said no, we don't want you to keep buying the yen, it's not a safe haven, we want the yen to fall, you saw the enormous amount of investment funds sort of refocus on gold and silver, saying OK, playing with the yen is over, let's go back to the basics."

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