London, 23 August 2011

Sharps Pixley: The gold bull run is only 11 years old ... yet it is behaving like a teenager. That is to say that it is ignoring kindly paternal advice to consolidate at lower levels and looks to ignoring common sense; yes - it very much has a mind of its own and it looks to be rushing headlong for a disaster. Or so I thought early this morning as gold nudged fresh all time highs of $1912.

Yes - there are parallels between my professional life and personal one with my middle son about to head off to Asia for his gap year in the next few days. Since hitting those new highs gold has retraced amidst some profit-taking. In the UK physical retail market we are seeing some good two way trade at the moment - plenty of investors still entering the market - while others (many of whom have held their metal for in excess of a decade) are keen to take profit and head for an exit. Interestingly many of the former you might describe as 'mature' and very 'English' while the latter tend to be much younger and often Asian in origin.

Where from here ? Shanghai have followed CME in raising margins on gold futures so that should take some of the heat out of this market. That said, a gearing of about 25:1 on the futures is still quite a high level of leverage. The next big driver will be news from Jackson Hole - have the policymakers got some sensible plans to relieve debt while maintaining some semblance of economic growth - especially on the jobs front.

Where from here? Well he's off to Thailand, Vietnam, China and Cambodia with his girlfriend before starting a degree to learn Chinese and Italian. If you are beginning to think the whole was becoming Asian-centric... you would not be wrong.

Ends --

Ross Norman, Sharps Pixley, London
www.sharpspixley.com