Citigroup Sees Gold at $3,500/oz; Silver Jumping to $100/oz
By Mark O’Byrne
GoldCore.com
29 August 2013
Gold fell from a three month high, its first fall in six days on profit taking after the likelihood of U.S. military strikes on Syria, at least in the short term, diminished. Prices rallied to $1,433.83 yesterday, the highest since May 14, partly due to concern about military action and the risk that it may lead to a deeper, more protracted Middle Eastern war.
Geopolitical risk, emanating from the Middle East in particular, has been underestimated for some time. Since the alleged chemical weapons attack on August 21, oil has risen sharply and gold has received a safe haven bid.
Gold and oil began rising in after-hours trading on the day of the incident and since then gold is up 3.9% and oil is up 5.5% (see chart). From $103.52 per barrel to $109.25 per barrel (NYMEX crude) and from $1,355/oz to $1,408/oz today.
Gold and oil are often correlated particularly when there are sharp movements up in oil prices as was seen in the 1970s and in the period from January 2002 to July 2008 when NYMEX crude oil prices rose from less than $20 a barrel to over $140 a barrel.
An escalation of the crisis in the Middle East and the real possibility that Iran and Israel could become embroiled in the conflict means that there is again the possibility of oil rising to new record highs, with an attendant rise in gold prices.
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