Dollar Up Equals Gold Slightly Off

The American dollar is up and if you’ve been following along, you know what that means: the long ascending path of gold has stalled for a bit.

For the last several weeks, there has been a media campaign by the new administration of U.S. President Barack Obama to bring hope to American consumers.   He’s done several interviews, had a news conference, and talked about it at every step.  His Treasury Secretary, Timothy Geithner as well as the Chairman of the Federal Reserve, Ben Bernanke, have both been up to Capitol Hill to answer questions, trying to restore faith in the economy.   Consumer confidence is, of course, one of the key factors in any economic recovery.  Others being unemployment, the stock market, and a strong dollar abroad.   And there’s a tough road ahead on the way to recovery.

Unemployment is still soaring.  Government experts have commented that those figures may continue to spike upwards through the rest of this year and into 2010.  But if you talk to the average unemployed person on the street, you can hear varied answers from “oh, it’ll all be fine, once these government programs get underway and they start hiring,” to the sheer panic caused by unemployment that has gone on too long.

But we will recover.  And how do we know this?  Because of consumer confidence, as indicated by personal spending, which rose a modest 0.2% in February, according to the Commerce Department.   This followed a revised 1.0% increase in January, which had to be revised to reflect that growth after earlier estimates went astray.  These tiny little increases were all predicted by government economists.

At the same time, personal income edged downward by o.2%, which is re-couping the same amount that it gained in January.  So the see-saw action continues in American wallets.

Also in gold prices.  The price went soaring upwards in the midweek, but then spiraled downward again on Friday.  And where gold had been selling for $1000 per ounce earlier this year (and well in advance of earlier predictions that it would hit that range around October to November) it is now trending downward around the $940 range.

We’re going to expect this for some months to come.   The government’s top money talkers haven’t said to expect anything other than a difficult year ahead.   President Obama has not suggested that smoothing out the economic numbers will be easy.  Or soon.  But it will get there.

Obama’s Media Blitz:Helpful or Hurtful?

Yikes!  What a volatile week for gold prices, right?  Most Americans are glued to the tube, watching the markets going up and down and down and down and then up again.  So shall we run down the events?

If you recall, it was only a few weeks ago that the price of gold hit $1000 per ounce, beating predictions by months.  The markets this week were affected by an all-out media blitz by the Obama administration starting on weekend talk shows a week ago.

Then on Sunday night, the Chairman of the Federal Reserve, the venerable Ben Bernanke was featured on “60 Minutes,” the CBS News magazine show.   The Fed’s chairman explained the Federal Reserve, its role in restoring stability and what his strategy would be.  He talked about the strength of the American economy and how Americans themselves should have faith in their own abilities and that of the economy to recover. It was the first time a sitting Chairman of the Fed Board had ever been interviewed on television.

That seemed to stabilize the markets a bit and the NYSE actually closed with gains (not big ones, but still gains) in the mid-week.   The price of gold began to fall just a little bit.

On Thursday, it was President Barack Obama himself, taking his turn on the airwaves.  He flew to California and while there, President Obama made a “First Ever for a Sitting President” appearance on “The Tonight Show,” with Jay Leno.  He talked about restoring faith in the nation’s economy and markets.

The market dipped at week’s end, as the government announced more unemployment figures.  But overall, not a bad week.  And one where we clearly saw how focused the American leaders are on restoring the economy to health.   Gold prices dipped slightly overall, down below the $900 per ounce mark, signaling that maybe investors are feeling comforted by these actions.

Mr. Bernanke can’t lower the Fed’s rate much further, so now to shore up the weak economy, he intends to simply print and release more money.  And the Treasury Secretary this week will announce the administration’s plan to create a new governmental agency aimed at overseeing their other tactic: buying up toxic assets.  So we may see more action coming up this week as the markets react to these items and other developments.

And what will gold prices do?  We will be watching that very closely.  Mr. Bernanke also stated that there will be no sustained recovery until the market regains strength and stability.  Gold prices, as we have seen, depend on that stability to, in order to retain their own position.

Gold: Near Record High and Potential to Reset

The price of gold continues to climb this month, as investors fears continue to drag on the American dollar.   The price stood at $950 per ounce last week, as the U.S. President Barack Obama pleaded and actually sort of bullied Congress to take action on his Stimulus plan.  The “safe haven” appeal of gold continues to draw investors in.

Stocks, meantime, along with crude oil futures, both continued to flounder as investors found nothing reassuring about the economy.  The U.S. government’s retail sales figures came in for the month of January and were better than expected, but in spite of that the stock market continued to lose ground.

Most analysts are now predicting that the price of gold will rise above $1000 per ounce sometime this year.  For the price to be as high as it is, in mid-February, is almost stunning.  Holdings in the largest gold exchange-traded fund hit a new record, rising above 900 tons last week.  These numbers mean investors are frightened and finding nothing to be calm about.

There are now new questions and numbers being bandied about with speculation about how high it could go.  “Prospects for $1,200 to $1,300 gold by the end of the third quarter remain underpinned by a set of cogent fundamental variables involving currencies, interest rates, and the global economy,” said Ashraf Laidi, who is the chief market strategist at London-based CMC markets.

Again, as we’ve been saying, whether you buy or sell in this market remains strictly a personal choice based on the economics of your backpocket and whether you are successful in retaining employment.  The government’s unemployment numbers were not encouraging either.  Although there was a slight dip in new claims filed, the number of continuing claims remains at a record high.

Gold remains a good investment for those who are ready to ride out the market.