Gold Rushing on Into Autumn

Gold glittered in August, registering an unusually strong performance for the month, and now kicks off what has historically proven its strongest period of the year.

The yellow metal climbed 5.7% last month. Historically, the August price tends to rise only 2.5% above July. Gold is now nearing its settlement high of $1,257 an ounce reached on June 18. Year to date, it’s up 13.3%.

(To view David Banister's reasoning for why silver may make big gains, click here.)

As we write here in the early afternoon on Wednesday, the SPDR Gold Trust ETF (GLD), which tracks the price of bullion, is down 0.2%. The Market Vectors Gold Miners ETF (GDX), which includes holdings like Barrick Gold (ABX), Goldcorp (GG), Newmont Mining (NEM), AngloGold Ashanti (AU), and Kinross Gold (KGC), is down 1.2%.

Multiple engines have been driving gold’s run to the upper right-hand corner of the chart, say market pros.

(To see Jeffery Cooper's article on how panic buying and selling days seem to follow one another, click here.)

For one, investors have turned to gold as a safe-haven investment in response to an uncertain economic environment. There's been a steady stream of downbeat data sparking worry about a US economy losing momentum, from free-falling existing home sales to volatile initial jobless claims.

Chicago Federal Reserve Bank President Charles Evans recently said that the risks of a double-dip recession have risen in the last six months. “A double dip is not the most likely outcome but I am concerned about how strong the recovery will be,” he said.

(To read Todd Harrison's views about naked short sales being banned, click here.)

Analysts at CIBC World Markets in Toronto, who see $1,400 gold next year, remind us that during the Great Recession, “gold was one of the only investment classes that provided positive returns. This fact will not be forgotten if the next recession materializes.”

Tom Pawlicki, the precious metals analyst at MF Global, expects the gold market to maintain its drive to the upside, with prices likely advancing toward $1,270 over the next couple weeks

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