Market closed on high note on Friday, image courtesy of Wall Street Journal.
Gold prices were the beneficiary of these entire crisis as nervous investors sell equities and buy gold, the kind of gold that is above the ground and not shares of gold miners. In our Jul13 update of gold forecast, we were highly bullish on the metal to continue the trend up, but honestly we could not see it would climb $1,800 in such a short period. We are now looking at a high of $1,950 an ounce for 2011.
Current uptrend might still have room to grow, but there are some developments in the market that point to lower gold in the coming weeks.
- CME raised margin requirements for gold futures and will most probably keep doing that if gold trend up above $1,800. Remember how silver sharply corrected after a few rate hikes (April 26 update of gold forecast).
- Moody's and S&P rating agencies confirmed France's AAA rating with a stable outlook, cooling down rumors the country is next in line for a downgrade
- France and Italy imposed a short-selling ban, which lifted European shares
- Italy approved a budget cut and tax increase of €45B over the next 2 years and announced the country would eliminate its budget deficit by 2013
(click for current prices)