Gold's appeal as a commodity or precious metal hasn't changed much over the years, but there was a time when it stayed between $255 and $290 for many years and was thought to be a poor investment. It met strong resistance at levels between $290 and $300 and kept testing and retracing this range, even though its main source in Africa was always short of supply.
All of this has changed a lot since it broke through this resistance in early 2002. In the last five years, prices have gone up by an amazing 250 percent, to around $625-$650 an ounce. This big change began when gold broke through its resistance at $300 and hasn't stopped since. In fact, $300.65 was the lowest price in the last five years. It was very quiet for a year between $300 and $400, and it stayed close to its 200-day moving average for a long time, going above and below it and making many traders angry.
It showed strength when it moved past $400 in July 2004 and broke through key resistances as well as its 200-day moving average. It picked up speed and began to show signs of a break-out around October 2005. When prices hit $500 in December, a lot of people cashed out, which kept the price stable for about a month. In 2006, gold prices rose almost straight up and were bought and sold in very large amounts. Gold hit $700 and then a high of $725.75 in May, right before the liquidity crisis hit world markets.
After such a steep and quick rise, there had to be a long correction, and gold went back to where it was before it went up. Prices kept going down until October 2006, when they were at $575. Here, they levelled off, and now gold trades between $625 and $650.
During this time, investors had to deal with a lot going on around the world. The U.S. was dealing with the Iraq problem, Israel invaded Lebanon, North Korea fired rockets and a nuclear bomb, and Iran and the U.S. were in a nuclear standoff. When things were uncertain like this, gold did pretty well and did its job as a safe place. Even with all of this, Gold is still 23 percent higher than it was a year ago.
Gold bullion seems to be at the very beginning of a long-term bull market. Gold has been going up for the last five years, no matter how you look at it, and it seems to be headed for even higher levels in the years to come.
