Sharps Pixley sees more upside to gold

Gold jumped 3% on news that the US Federal Reserve is unlikely to raise interest rates before 2014. But the price will move higher still suggests precious metals trader Sharps Pixley’s CEO Ross Norman.

Famed economist and investor Benjamin Graham once said that “in the short term the market is a voting machine, but in the long term it is a weighing machine”. Last nights move in gold was a classic knee jerk ‘vote’ against economy recovery with investors and speculators alike piling in. The weighing machine analogy suggest that in the longer term things revert to their true worth – in gold’s case this is not a problem given its compelling fundamentals.

With the US Federal pledging to keep interest rates in check until late 2014 – gold soared to $1713, its highest since December 9th 2011, a rise of nearly $45 or 3% on the day. Last nights move in gold was the largest in four months.

The decision by the Federal Reserve was resounding with a 9-1 vote in favour of capping medium term treasury rates. Gold investors however chose to ignore a further statement which advised the Fed would be targetting an inflation rate of just 2% – but the voting machine advised “we don’t believe you”.

Gold was lifted by heavy buying of gold futures on COMEX where it witnessed volumes twice the previous months average. Although there was heavy speculative buying, anxious investors joined the fray who are concerned by currency depreciation as global central banks use easy monetary policies to flood markets with cash.

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