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« USD To Rally Within Bearish Channel? | Main | The Dollar in Your Wallet Is Only Worth 18¢ »

Gold Prices: An Alternative View

Emirates Business.JPG

In an article entitled 'The fall of gold price could be as spectacular as its rise' by David Robertson of Emirates Business 24/7 an alternative view is presented regarding gold prices that may be of interest to you, as follows:

The price of gold hit another record last week of $1,070 an ounce and it would surprise nobody if yet another record was set this week.

What I can't work out is why. The fundamentals certainly do not support the price. Real demand, three quarters of which comes from jewellery, is non-existent as the high prices and general economic climate have put people off buying pretty baubles.

Even investment demand from exchange traded funds (ETFs), which drove up prices last year, has stalled. The other usual factors influencing gold investment demand – systemic risk and inflation fears – have also been rather subdued. The gold price usually tracks indices plotting risk and inflation forecasts, but in the past few months there has been a divergence with the threat of bank failure and rampant inflation falling while gold has continued to rise.

The most common explanation for gold's surge has been the weakening of the US dollar against the euro so investors are switching their assets from currency into something a little more solid. There is probably an element of truth in this, but enough to send gold to $1,070 an ounce?

Time will tell and this week could well set the tone for future progress in the precious metals arena. We expect gold to hold and go higher but then again we would wouldn't we!

Have a good one.

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Reader Comments (1)

I am a long term bull on gold, but a short term bear. Gold stocks will correct down, for gold will correct dowmward before the big upleg. There could be the perfect storm, a technical bounce in the dollar before it resumes its downwarn trend, and a correction in the stock market, for gold stocks have not yet detached from the stock market as a whole.

October 19, 2009 | Unregistered CommenterRich

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