Gold back over £1000 per oz - will it stay there?

As the price of gold tumbled earlier this week I mentally scrambled for the reasons why I had bought the stuff in the first place.

Yesterday and today's price rise - which took gold back over £1000 per ounce - eased my anxiety but there are still a number of issues I need to look at.

Gold ETF Investor market report: 24-28 October 2011

As most commentators have pointed out, last week's eurozone rescue package (BBC explanation) coincided with gold prices rising again. The interesting point being that gold moved in the opposite direction to shares: on Friday the FTSE 100 closed down 0.35% while ETFS Physical Gold (PHAU) gained 0.84%. (Google Chart)

The big picture reasons were discussed in a Wall Street Journal piece in which the vice president at RBC Capital Markets said the eurozone plan involved printing lots more money and so it was an "inflationary rally" (if there's more money around then prices will rise).

Similar observations were made by a contributor to Mineweb but with a different spin: "We do not think that is the reason why gold and silver are rising... We need the ship to be made seaworthy. There is no sign of the political or financial will to do that. This continuing lack of confidence and uncertainty is a far greater contributor to the rising gold price than anything else."