Environment Conducive To Further Gold Price Gains
- Some similarities for gold market between 2008 and now
- Barclays sees a number of factors as supportive for the metal
- Positive backdrop suggests further gains are likely
By Chris Shaw
In late September the gold price fell by 10% in just four trading sessions, a price movement Barclays Capital notes was enough to draw some comparisons with the price action and environment experienced in 2008.
In 2008 the gold price broke the US$1,000 per ounce barrier in March but was back below US$700 per ounce by October, as gold was liquidated to meet the needs of margin requirements elsewhere in financial markets. Prices then slowly recovered, not breaching the US$1,000 per ounce level again until the first quarter of 2009.
This year the move was quicker as from an all-time high of more than US$1,900 per ounce on September 6, it took less than a month for the price to fall below US$1,550 per ounce as risk aversion and the need for liquidity weighed on the price of the metal.
The common link between both periods according to Barclays is a fragile macro environment, something that remains the case at present given ongoing sovereign debt issues in Europe, US deficit issues and general uncertainty with respect to the global economic growth outlook.
One difference to 2008,