What will strategists project for the metals market after gold exceeds its historical high?
*CNNMoney, by Paul R. La Monica, March 2, 2011
‘Gold Glitters but Silver Really Shines
Gold bugs rejoice. The yellow metal is at a record high. And guess what? It’s probably going to keep climbing higher until oil prices finally come down.
Here’s why. Gold and oil tend to trade in tandem. Many of the same factors that drive up oil prices, i.e. inflation fears, a weak dollar and geopolitical turmoil, also help lift gold.
Gold, even at the absurdly high sounding price of nearly $1,440 an ounce, might even be considered a tad undervalued when compared to oil.
I first wrote about the ratio between gold and oil prices over two years ago. Typically, it’s considered healthy for gold to trade around 15 times higher than the price of oil. So with crude right around $102, gold could be fairly valued at $1,530.
With this in mind, Richard Ross, global technical strategist with Auerbach Grayson, a brokerage firm in New York, said he would not be surprised if gold went as high as $1,527 an ounce before long.
Of course, oil could (and as I argued Tuesday, should) drop once the crisis in the Middle East abates. But that’s a process that’s likely to unfold over a period of weeks, if not months.”
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