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by Debbie Carlson at The Guardian
China is wobbling, oil is plummeting, Britain is threatening to quit Europe. And the gold bugs couldn’t be happier. With a 15% gain in 2016, gold’s rally has its diehard fans excited. But for how long?
This is the metal’s best start since 1980, when gold prices rallied about 270% to then all-time highs of $850 an ounce on an oil-supply shock crisis and raging inflation. This year gold prices are higher on worries over economic weakness in China and Europe, and the Bank of Japan’s surprise move to negative interest rates.
All the bad news has stoked some concerns of a recession, if not a full-blown economic crisis, like in 2008. After that meltdown gold prices doubled, lifting values to more than $1,900 by 2011, a nominal all-time record.
Gold prices ended 2015 in a funk, but the global stock markets’ shakiness and global economic worries “were just what the doctor ordered for gold bulls”, said Sean Lusk, director of the commercial hedging division at Walsh Trading.
Gold bugs dream of a time when the metal’s value will soar, lifted by economic doom and hyperinflation from central banks’ extraordinary monetary policy to revive global growth. Gold bugs’ dreams have been deferred, but will this time be different? Is the yellow metal’s current strength a harbinger of another move like 1980 or 2011?
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