Good News for Gold Buyers: Prices Level Off

There is good news and bad in gold prices this week.  It all depends on your point of view and position in the gold market.

As we’ve discussed here several times, the price of gold is firmly tied to the strength of the U.S. dollar and what goes on in the American economy.  When the economy is strong, the price of gold is, well, lackluster.  When the American dollar is strong, the price can actually fall.

Hence in the last year or so, we’ve seen increases in gold prices that have surprised and delighted some people as they sold unwanted gold items and pieces that perhaps were out of style or for some other reason, no longer wanted or needed.

The per ounce price of gold was expected to top $1000 by sometime this coming Fall.  But it hit that mark a couple of months ago.  It seemed that investors were hungry for the stability provided by gold as the economy seemed to be rolling on waves that threatened to take us all under.  The more the future seemed to shake, the more gold came out of safes, jewelry boxes, and anywhere else it had been hidden to re-enter the market.

The price of gold hovered there for awhile, but then it plateau’d.   Investors seemed to be thinking things over.   As we waited and held our breath wondering what effect, if any, the new U.S. President and the economic team under his administration would have on the financial futures of millions of people.  What would they decide?

The polls show that President Barack Obama enjoys a personal approval rating of 67% and job approval at 61%, but that a majority of Americans do not approve of the way he handles federal spending.  51% disapprove.  And at 48%, which is a statistical “even split” (because all polls have a margin of error at “plus or minus 3-6%”), half the country doesn’t like the way he’s handling the U.S. budget deficit.

But in spite of that, and maybe because he promised on Monday to create 600,000 new jobs over the next 100 days, the dollar is holding strong and the price of gold is wavering.  Gold futures have now slid to a 2-week low, at $945.40 per ounce.

The economy is cyclical.  Gold prices are cyclical.   But overall, investments in the market as well as gold have grown in recent years.  So… is gold going up good news for you?

Gas Up? Gold Up!

By now, you’ve noticed the price per gallon of gas inching, no vaulting up at the pump once again.  Just in time for vacations and summer fun, the price of gas skyrockets to heights not seen in months.

And with it, the price of gold.

The price of gas, we are led to believe, is increasing because of course, the OPEC ministers stranglehold remains in place.  There is no shortage of oil. In fact, storage tanks at refineries all around the world are said to be full and waiting to be shipped to greedy consumers, ready to purchase it.

But those customers are suffering through the worst recession in more than 30 years.  And gas prices starting an upward trend again is never good news, but in fact is particularly bad news in a struggling economy.   It depresses American consumers who were only beginning to feel good again about their economy, about their prospects for returning to financial health, and about their future.

The price of gold has been tied to the economy because of its status as a safe haven in tough economic times.  Experts thought that gold would raise to $1000 per ounce later this year, but it reached that height early, when consumers reached a near-frenzy level of concern about the economy.  It sank back down to teeter just above the $900 per ounce level where it stayed for some time.

Now they have found some level of calm and confidence, however halting, has been restored.  But the price of gold is inching up again.

Two weeks ago, it reached the $950 per ounce barrier.  Now it is at $960 per ounce.

What this says to me is that while American consumers may wish to see a return to economic health, they are still far from certain of it.  They are being given conflicting messages.

They are told they need to get out of debt, and the government just enacted new credit card laws that will protect consumers from some credit card companies increasing interest rates and doing other predatory actions against consumers who struggle with controlling their spending.

But at the same time, experts know that for the economy to recover, the joyful spending by consumers must resume.  It must start again and become plentiful.  New cars have to roll off lots.  Homes have to be purchased.  And the dollars have to begin to circulate in the economy again for it to return to health.

I have always heard that it’s best not to worry about what someone says, but instead to focus more on what they do.  In this case, consumers seem to want to believe, but their investments in gold, which are fueling an increase in the price, are what says more to me.  We may see more increases in gold prices ahead before the economy returns to a healthy state of operations.

Zoom, Zoom, Zoom…. Up Go Gold Prices!

I hope you enjoyed a great Memorial Day Weekend with a wonderful get-away and are ready to return to work because we definitely have something worth looking at, as we get into the summer season.

The price of gold is back up again.  Gold shot up to over $950 per ounce in the last week, roaring to nearly it’s 12 month high once again as there are signs that the United States economy is beginning to bloom again.

The price of crude oil fell once again, which was startling to many in the market, but it only dropped .99 cents on the full price of $61.05 per barrel at the New York Mercantile Exchange.  Don’t expect too much good news too fast, though.  The Federal Reserve predicts that the worst has been seen, but that the American economy will continue to shrink through the rest of 2009.

Most economists believe that when Americans started to feel better about their economy, then the economy would start to feel better and recovery also would pick up speed.  And there are signs that this is occurring.  Home sales are picking up again.   The prices are still down, but banks are slowly beginning to lend again and people do still need places to live.

Unemployment is still sky-high, particularly in hardest hit areas like Michigan where automakers have cut to the bone (and may yet cut further!) and California where the housing crisis is at its worst.  But the general mood is lifting, even if many financial numbers are still slumping.

This has many wondering if as Americans start feeling better about their futures and employment, will they start to recover their taste for acquring?   No other modern culture has ever had such a taste for enjoying the fruits of their hard work.

Most experts believe that the recession will have some long-term effects on shopping habits.  The U.S. Congress has just enacted laws to reform credit practices, to stop its citizens from over-borrowing and over-using credit.  The laws will also act to protect borrowers from credit card companies who would raise interest rates at such times, undermining the abilities of some people to repay what they have borrowed.

It’s hoped that we’re learning from our mistakes made in the current economic downturn, but it’s still likely that gold, always and ever the most popular precious metal in history, will be viewed as a commodity of lasting value.  And that when we do learn from our mistakes, our credit will once again be “good as gold.”

All That Glitters…

If you’ve been waiting to buy gold, this might be the moment.  Gold prices have fallen 8% in the last several weeks.  The downward glide seems to have halted, which is comforting to some.  Jewelers are considering whether it might be the moment to stalk up.  But so far, nobody knows.

And why?  Let’s look at the basics.  In the past week, the venerable Ben Bernanke, Federal Reserve Chairman and a key architect of any recovery that might be underway, said that he expects the economy to continue its painful twists and turns without hint of recovery until 2010.  That’s a departure from the past, when he said to expect the turn-around to begin in late 2009.

Not only that, but we’re also seeing signs of deflation.  Retailers are being hit so hard that they are dropping prices in desperation.  Some of those prices may force them finally out of the market.  Car dealerships, in particular, are struggling with the rules of car-buying now undertaking serious rewriting.  It’s a great time to be in the market for a new car.

But what about gold?  Gold almost always holds its value.  And although it has slipped a bit, the determination of whether to buy or sell has always been a personal one.  If you are finding yourself with additional cash, investment gold might be a good place to stash it.  If you are needing some cash, and have some extra gold, this is as good of a time as any to sell it for its value.  And if you don’t have a lot of cash, well, then let me steer you towards some of the rings and earrings on this website, which are particularly good values!

The decision to buy, sell, or stay out of the market must always be made in a careful way with consideration given to the personal situation at hand.  And this time, like every other difficult economy, we will all need to keep that at the forefront of our thinking.

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.

Faith in the Bailout? Or in Gold?

With the U.S. government now struggling to steady the teetering economy, and bailout after bailout being sucked down by greedy banks and other businesses who then ask for more, where can investors look?  The market is clearly struggling under the weight of unscrupulous investment deals that have now gone south.  And many are looking at the gold market.

Gold prices are currently sky high.  In late February, they topped $1000 per ounce; a benchmark that wasn’t anticipated until much later this year.   Since then, they’ve come down somewhat again.

Sure, the glittering metal has mesmerized people from all walks of life for thousands of years.  But as an investment, it’s had a slightly tarnished history.  In the 1980’s and 1990’s, it actually lost value as the stock markets gained and some global central banks started selling their reserves of the precious metal.  By the late 1990’s, it was below $300 per ounce and as an investment, it returned zilch.

But then came September 11, 2001.  The terrorist attacks of 9/11 shook global markets and sent investors scurrying for something they could hold on to: gold.   By 2006, the return was 16.25% across five years.   And last year, the global equity market collapse brought a boom in the price of gold.

The attention being placed on gold right now is largely due to the uncertainty that many investors feel.  In the past, they might have considered buying land as an investment, but speculation in real estate has cost already. And nobody feels sure where the drop in land values might end.  Thus, as the stock market crashed last year, demand for gold rose 64% over the preceding year.

What does this mean to you?  If you’re investing in gold for financial security, this is a tricky time.  The price of gold has already seen huge gains.  Nobody wants to get in when the price is already high.  But if you are trying to get out, it might not be the right time to do that, either.  Buyers are now turning away from trades because the high prices have brought out everyone with a bulky neck chain or bracelet left over from the 1990’s.

If you buy gold on a site like Apples of Gold, you are buying it as a purchase of love; either you love it or you care deeply about the person that you are buying it for.  These are not financial investment pieces, but rather a down payment on a lifetime of caring that you hope will return rich rewards on a regular basis.

Gold Standard – Part II

Last week we talked about the Gold Standard, which was when the United States government guaranteed each gold-backed American dollar in circulation.

With the current economic contraction that is underway, some people are positing the notion that returning to the gold standard would help.  But the reality is that the gold standard contributed to the Great Depression.

A currency is only as good as the government’s credibility that backs it up.  Sticking with the gold standard?   If a government goes on, then off, then on again,well, you can see that credibility is quickly lost.  And historically, that is what countries have done.

In the years after World War I, many countries had suspended convertibility of gold during the war, and then stayed of gold.  They experienced fiscal chaos as speculators moved in and wildly fluctuating monetary policies robbed citizens of stability needed to rebuild.

But counting on a gold standard, in a fiscally unstable market, when investors, speculators and citizenry doubt governments’ ability to keep to that standard was edging too close to the cliff.

International capital flows became more erratic, not less, as doubts were raised about whether first the pound, then the dollar.

Britain lost ground under these speculative attacks and released its gold standard in 1931.  The U.S. toughed it deliberately raising interest rates in the same year, when the economy was already in near free fall.  The resulting damage to the economy is well known.

The longer a country stuck to the gold standard, the more overall deflation it experienced. Many experts are persuaded that this deflation greatly added to the economic difficulties of those countries that insisted on sticking with a fixed value of their currency in terms of gold.  It got worse, not better.

The bottom line is if buying gold is your standard for maintaining economic stability, then let it continue to be your standard.  As for a return to the gold standard, that is unlikely and probably ill advised.

Gold: Time to Buy, Sell, or Hold?

The price of gold is doing the rollercoaster thing again. Up sharply in the last week, then dropping precipitously in the last several days, and why? Experts tag this to the fact that it did go sharply up and then come screaming downward as everyone rushed to sell their gold at the record high prices.

Consumers are in a state of shock mixed with agony over what is going on in our economy. Daily reports of layoffs, bankruptcies, going out of business sales, and other “end of all” financial dealings are almost too much to take.

Buying and selling gold in shaky economic times are nothing new. Gold has long been called a “barometer of fear.” When people are anxious about the economy – they turn to gold and bid the price up. The two main things that make people anxious are deflation and inflation. Most think that deflation is “falling prices” and inflation is “rising prices.” Actually, rising and falling prices are symptoms. The root causes are decreases (deflating) or increasing (inflating) of the money supply.  Gold has the remarkable ability to store value in both deflationary and inflationary times.

But what about you and your situation? What about your economic worries and woes? If you are concerned about the value of the dollar, is this a good time to sell? Not really… because holding gold may allow you to hang on to the value of your investment.

Economics are cyclical in nature. Almost every country around the world has had at least one major “currency crisis” over the last one hundred years. Those that had some of their wealth in gold survived.

It’s best to think of your personal investments in gold as insurance. Do not think of gold as a way to “make money.” Do not try and “time the market.” It is better to buy gold in small amounts regularly, every month for example, over a period of time. The percentage of your total wealth devoted to gold is a personal decision and depends on your particular situation. A conservative goal would be ten percent. In times of uncertainty the “best practices” percentage could be much higher.

Gold can protect against both deflation and inflation. It would be best if we all kept some of our wealth in gold where possible. The time to sell is when the market is ripe and the value is needed. The time to hold is when the market is rocketing up and downward, like now. Let others panic, while you hang on to any gold you may have, along with its value.

Marketwatch: Gold Prices Waver

Gold prices are already starting to rebound, after two weeks of falling prices brought on by a steep crude oil decline and worries about deflation.

But let’s factor in a few other things, like predictions in the past week that the price of a gallon of gas at the pump could drop to $1 per gallon.  And word this weekend from President-Elect Barack Obama saying this weekend that “things are going to get worse before they get better” and that he will “offer an economic stimulus plan equal to the task.”

The task ahead is difficult to put it mildly, as November unemployment figures dropped by the largest numbers seen in decades.  And where is gold?  The precious metal’s appeal as a hedge against inflation appears a bit tarnished but it is still considered a solid bet.  “I think that the whiff of deflation that’s in the air is enough to keep the near-term pressure on gold,” said James Steel, chief commodity analyst as HSBC.

There’s no doubt that we’re in troubled waters economically.  Dealing with the loss of jobs, frozen credit markets, falling home prices and other signs of economic turmoil is “my number one priority,” Obama said on NBC this weekend, adding that “more aggressive steps” are needed to cope with the crisis. The precious metal fell last week in line with the softer euro after the European Central Bank cut interest rates by a larger-than-expected three-quarters of a percentage point.

“Gold is mirroring the directions in euro-dollar after the ECB rate cuts,” said Pradeep Unni, a senior analyst at Richcomm Global Services.  “The dollar also seems to be discounting the gains ahead of the (U.S.) non-farm payrolls data scheduled tomorrow,” he adds.

The ECB cut its benchmark rate to 2.50 percent, its lowest level in nearly 2-1/2 years, as inflation plummeted and the euro zone economy sank deeper into recession.  This followed a full percentage point cut to 2 percent by the Bank of England.

In the slightly longer term, rate cuts by the Fed and the Bank of England are likely to benefit gold, if they increase liquidity, analysts said.

“The recent sharp dip in inflation pushed up real interest rates, exerting pressure on gold,” Commerzbank said in a note. “Generous rate cuts are, therefore, good for gold as they again reduce the opportunity costs involved in holding it.”

Traders turned their attention to U.S. non-farm payrolls data due on Friday for clues as to the next direction of the currency markets, and of gold.

Physical demand eased in some of gold’s traditional markets as traders awaited price falls. Indian buyers looked for prices of around $740 an ounce before making purchases, dealers reported.  The price is up as the week begins, but how long that will continue depends on what other actions are taken as the week continues.