Gold price pauses for breath

Analysts’ predictions that the gold price would continue to rise through to the end of the year have received a setback.

At the beginning of 2007 the cost of the metal stood at just over $600 oz but when it exceeded $840 oz earlier this month, there were expectation of even higher levels by the year end.

However, the price is currently around $770 and there are a number of factors that could keep it at this point.

Levels of profit taking have certainly have had an influence and there is also the likelihood that the decline in the value of the dollar may cause Central Bankers to act.

The rise in the gold price has been linked to the dollar’s decline and economies that rely on US markets are now seeing their exports come under competitive pressure, so that attempts could be made to slow any further fall.

The price of the metal may still rise sharply in the months to come because the fundamentals that have supported the price so far are still in place, but the current hiatus could continue in the short term.

One major change in the gold sector is the increase in gold Exchange Traded Funds, which now hold over 700 tonnes of the metal.

Nervousness among investors could trigger sales that bring some physical gold back on the market and whilst Central Banks may also sell off gold, there are reports that Russia and some Middle Eastern nations are keen to buy.

The balance of opinion seems to be that gold will continue to gain but the overall advance will not be as rapid as suggested in some of the predictions of the past few weeks.