J.P. Morgan Chase & Co. (JPM) said they see gold prices steadily climbing over $2,000 this year, reaching $2,500 by the year's end.
We haven't seen a gold-trend like this since the 1970s, peaking around 1980, but the current global economy could re-create a similar "parabolic" pattern for gold within the next few months.
Late yesterday, both J.P Morgan and Goldman Sachs Group (GS) raised their gold prices. Goldman suspects prices for an ounce of gold to be closer to $1,900 in the next year.
Gold in USD terms is 2.4% higher and is higher against all currencies and trading at USD 1,760.40 , EUR 1,234.10 , GBP 1,075.70, CHF 1,306.80 per ounce and 132,719.00 JPY.
Gold’s London AM fix was USD 1,770.00, EUR 1241.75, GBP 1080.98. Gold reached new record nominal highs at $1,780.10/oz and new nominal highs in euros and sterling also this morning.
In the short term there is the risk of a correction as gold’s rise is now becoming front page (on front page of FT today) and headline news.
The fact that silver has fallen in recent days and remains below $40/oz and the fact that gold mining equities have also not risen may also be a warning signal.
Gold has risen from below $1,500/oz to nearly $1,800/oz in 5 weeks (since the start of July) and is up nearly 18% in dollar terms.
Therefore, in conventional terms gold is most certainly overbought.
Iniating QE3 will have further bullish affects for the precious metal commodities too.
What does this mean for investors? Simple: follow the trend, buy on dips (like we've been telling you...). Don't sell in haste, but if you do decide you want to sell for profit "do so after two days of lower prices or a weekly lower close."
Moral of the story? Hold onto gold if you can. The bull market trend looks pretty solid for the foreseeable future. We'll let you know when that changes.
*Idented, italicized excerpts from Millrock Resources Inc.