Central banks - the long-time nemesis of the gold sector - are doing an about-face to become its biggest supporters. And this quantum shift promises to gather momentum in 2010 with the prospect of a new era of net buying continuing to fuel robust demand for bullion. According to John Embry long-time gold advocate and the chief investment strategist at Toronto-based Sprott Asset Management, central banks will most certainly underpin the price of gold next year.
We have consistently warned (and continue to do so) that gold’s advance would be marked by high volatility and occasional sharp reversals that would lead some to believe the long bull market in gold has ended - and we will continue to hold this view even if the metal falls back yet another $100 an ounce.
When taken separately, oil and gold can tip you to certain goings-on in the economy: Oil tends to become more expensive when gross domestic product is on the rise, and gold turns bullish when the greenback falters. But what about gold’s relationship to oil? Can the interplay between the two commodities—expressed in the gold/oil ratio—tell us anything about our current economic prospects?