Gold briefly broke through the $1,900 an ounce barrier last month as the precious metal continued its seemingly unstoppable climb in value. This unprecedented rise has been fuelled by more and more wary investors sinking their money into gold as a safe haven.
The Greek led debt crisis has been sending ripples of fear through the market (as well as challenging European leaders) and caused the EURO currency to wobble. The Tea Party led revolt against debt reduction measures threatened a US a default. Stock markets have developed a roller coaster profile. Gold is now very much in fashion as a safe haven.
The key questions is how long can the surge continue? Will it soar on to reach the $2,000 an ounce barrier by the end of year or will it be another bubble that bursts with a very expensive bang?
Right now there are few indications that the price is going to do anything but continue to increase. Greece’s debt laden economy has again been bailed out, but this is clearly not the end. European Commission President Jose Manuel Barroso recently warned that the Eurozone sovereign debt crisis could spread from the smaller debt laden nations to Italy and Spain, the currency area’s third and fourth largest economies.
Add to this the recent deadlock in the US debt, growing fears of a US recession and stock market plunges and investors are more worried. As a result they are heading for the safe havens of today: gold, the Swiss Franc and German government bonds.
Indications are that the value if gold will continue to increase, and there has been nothing in the recent news around the world to suggest that any bubble is about to burst soon. Could it reach the $2,000 mark per ounce by the end of 2011? There has not been a sustained upsurge in prices like this in the last 40 years, so if the trend continues it’s a long shot possibility. If broader economic bad news keeps arriving as it has been over recent years, it has a stronger chance. The issue for investors is whether to risk the bubble or not….