After watching some drastic one-day plunges this year for the yellow metal, investors are wondering why gold prices are rising now– could this be the start of a healthy, prolonged rebound?
On Monday, gold enjoyed its biggest one-day jump in more than a year. It hit a four-week high as gold finally broke through the $1,300 an ounce technical resistance level and finished above $1,335 an ounce.
Short-covering by technically-oriented traders and the perception that the Fed will continue QE for the foreseeable future are the short-term answers as to why gold had such a strong day, and why prices are rising now.
But there are solid fundamental reasons as to why gold should and will keep recovering in price in the months ahead.
One key reason was pointed out several times by Money Morning Global Resources Specialist Peter Krauth.
I’m talking about the growing divergence between the paper (futures, etc.) gold market and the actual market for physical gold – “market dislocation.”