Gold should be at $2,000 an ounce by now. It’s not, but it has climbed 21% since the markets started falling apart. As I write this people are selling gold to buy dollars or to free up cash. But this can’t last; it’s just a knee-jerk reaction to the latest equity sell-off. The most likely scenario is that once the weak hands are out, inflation will kick in and gold will rally strong.
In fact, there is evidence that central governments are starting to hoard it. In the second week of October, the cost of borrowing gold jumped by a factor of 3
to 2.68%, the highest since May of 2001. Historically, a jump in the lease rate registers before a boost in price of the metal itself. This is a bullish sign.
