Gold Up But Stabilizing
April 28, 2010 by Martha Rooks
Gold is climbing in the markets once again. Our favorite precious metal was at $1173.40 per ounce earlier this week and, although it has since slid to $1168.10 by mid-week, the trend seems obvious that people are both concerned about the economy, markets and their investment dollar AND feeling they have enough money to actually do some investing. We are definitely “feeling the love.”
Why is this going on now? Because some of the world’s currencies are slipping. The euro, for instance, fell to its lowest point against the U.S. dollar this week. Greece’s economy is teetering on chaos, with the government’s debt surpassing its ability to pay it off. The World Bank and the International Monetary Fund are stepping in with a loan package for the Mediterranean nation that will help the country return from the crisis, but the damage is done. Greece will be borrowing money for many years to come at a much higher rate than previously paid.
When people get nervous about the economy, the state of the world markets and their own financial security, they turn to gold. The price goes up as demand rises and supply tightens. That’s nothing new. But how much higher will this go? There’s some good and bad news on that.
Bad news for those of you who are interested in selling and good news for those of you who are considering a Mother’s Day gift, an engagement and wedding set or just a personal reward for having survived the worst recession since the Great Depression of the 1920′s. Gold probably will not go much higher at this time.
The reason for that is because the U.S. economy is recovering and in spite of everything that we learned during this recent economic downshift, we remain the world’s biggest consumers. We buy all kinds of gadgets and electronics. We like new cars. Our houses are large. Our lives are large. And although slowly shrinking, our debt is generally large, too.
So why the expected flatline? The eye is on the United States Federal Reserve Bank. As the economic recovery gets underway in the U.S., the Fed is expected to increase interest rates, which had been at all-time lows. When the Fed raises the rates, the dollar will likely see a boost and if gold follows history, when the dollar strengthens, the price of gold usually will fall.
Good news for the economy. Good news for gold retailers. Good news for gold buyers. We hope you’re ready to “feel the love” for gold once again.
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