Recent price increase of gold probably driven by speculation

The gold price has risen to a seven-week high of nearly $1,170 per troy ounce as the week begins, finding support among other things from a weaker US dollar. With the price increases of the past two weeks, the technical picture for gold has brightened noticeably. If it were able to exceed its August high, we could see technical follow-up buying. 

What is more, the technically important 200-day moving average is now in reach. Although this could prove a hurdle in the short term, higher prices would presumably be achieved if the price were to exceed this threshold in any lasting fashion. 

The other precious metals are also making gains in gold's slipstream, though silver is still trading below the $16 per troy ounce mark. Platinum and palladium profited on Friday from the surge in base metal prices and increased by 3.5% and 1.4% respectively. 

"Platinum costs around $990 per troy ounce this morning, its highest level in 4½ weeks, and has thus reduced the price gap to gold to $180. The increases in gold and silver prices are built on sand because they were driven to a significant extent by speculation", says Commerzbank. 

Net long positions in gold for example were expanded by 13% to 45,800 contracts in the week to 6 October, while net long positions in silver even rose nearly three-fold to 28,200 contracts. In both cases these are the highest levels in four months. This means that correction potential has built up which could be released if the price rise were to falter.