Three Reasons Why Gold Will Move Higher

Here is a part of Jim Regan's Article on SA, entitled "The International Gold Rush: Bulls May Soon Be Rewarded" :

Despite volatility that can cause short-term fear (such as that found in recent weeks), there are several reasons why the momentum points to higher prices in gold. I am concluding that we can all but ignore the typical “real world” supply-demand equation in favor of investment demand. The major catalysts I see for gold’s uptrend include:


1. Bullish trends in the gold options markets
2. The historical “gold-oil ratio” averages
3. Potential market-moving events to drive demand
   

Gold Options: As recently as Friday, July 25, options trading action pointed to levels upwards of $1,200 in the gold market. Bullion definitely has a chance to rally past these record-breaking levels, as a flurry of bets from out-of-the-money calls has a targeted range all the way up to $1,500 per ounce. After a recent fall in the commodity market, there has been strong volume on December $1,000 calls and spreads between $1,200 and $1,300. As gold options are currently dirt-cheap for traders, the trend in the options markets has higher gains on the radar.

Gold-Oil Ratio: One of the more interesting data points is the historical average gold-oil ratio which is at this point in time completely off the mark. If history proves an effective lesson, precious metals need to increase dramatically while oil needs to continue its decline. As we are sitting right now, gold would need to hit the $2,000 per ounce mark in order for the ratio to balance. Granted, this can be offset slightly with oil tailing off further; but the case for rising precious metals is evident.

World Events: Certain market moving world events could lead to a staggering demand for gold, adding yet another catalyst to the bullish playbook. With the possibility of domestic & international economic disaster, a strong threat of inflation around the world, the potential catastrophic war between Israel & Iran and even flailing currency markets, any one of these deal-breaker events could cause a sharp jerk upwards in the gold markets. Investors betting on the world’s furthered economic demise are moving all the chips on the table toward the precious metals markets.

Related Posts :

1. Paul Tudor Jones Commented on Oil Bubble
2. Gold’s Tight Supply, Soaring Demand Could Keep ETFs Looking Sharp
3. Hedge Your Funds in Gold Stocks
4. Gold May Rise to $5,000 on Inflation, Schroder Says

Please Note!
This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer on the bottom for more information.

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