There are many functionalities of gold: a commodity, a precious metal and an investment vehicle. For thousands of years, gold has been very popular for both as a commodity and as a precious metal. However, as an investment vehicle, there was a time when gold definitely was languishing at stages of about $255 to $290 an oz. for many decades, and was regarded undesirable as an investment due to its lack luster returns. Often, It confronted stiff resistances at stages of $290-300, then at $400 and continue to test this price level for quite some time, regardless of a perpetual scarcity of inventory from its principal suppliers in Africa.
All this has changed dramatically when it broke this resistance in early 2002, and prices have shot up by an astounding 250% in the last five years to around $625-$650 an ounce! This dramatic move started when gold broke its resistance at $300 dollars and hasn’t looked back since. In fact, the low over the last ten years was $300.65. It stayed very quietly between $300 and $400 for a year in-between, and was hovering around its 200 day moving average for a long time, frustrating many traders by moving above and below it.
It finally showed some signs of life when it broke vital resistances and its 200-day moving averages at the same time, moving beyond the $400 level with higher volumes in 2004. It gathered momentum, and showed signs of a major price break-out in 2005. In December 2005, gold breached $500 level. Then it hit a tidal wave of selling due to profit taking by many traders and investors at that time. That allowed a price consolidation for the remaining of the year. In 2006, gold began a closely watched vertical rise with very larger volumes, with gold price hitting $700 and then hitting a high of $725.75 in the month of May, just prior to the global market liquidity crisis strike.
Then, what followed was an extended period of correction. This correction was normal and inescapable following this kind of steep and swift rise, and gold retraced to 50% of it rise. This fall of price was orderly, and costs moved all the way down to $575 amounts till October 2006. It truly is right here they stabilized and consolidated then moved upward again to precisely where gold now trades at $1500-$1650 amounts inside the past few months.
Buyers faced many worldwide issues throughout this time, because the U.S. was coping with the Iraq concern, Israel invaded Lebanon, North Koreans fired rockets too being a nuclear bomb, and making use of a nuclear confrontation with Iran and the European sovereigns debt crisis. With potential calamities facing the world, gold did actually effectively and served its role like a safe haven for investors. Despite all this, looking from year to year, gold continues being significantly higher.
Gold bullion and gold coins now would seem, once again, at the forefront of a major new bull market. Whether you like it or not, gold had a good run in the past ten years and is heading much, much higher in the foreseeable future once its current consolidation phase is over.
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