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 Surpasses $1,000 on Fears of Inflation

Fears fomented by long-term inflationary concerns over President Obama’s huge stimulus package drove investors to gold as a hedge against likely devaluation of the U.S. dollar.

Historically, the price of gold has been intimately wed to the value of the U.S. dollar. This was not difficult to predict. As the dollar loses value, gold gains it. It’s a time-honored maxim, set into motion when about a century ago, on March 14, 1900, the U.S. government passed the Gold Standard Act.

The Gold Standard Act Stated:

“…the dollar consisting of twenty-five and eight-tenths grains (1.67 g) of gold nine-tenths fine, as established by section thirty-five hundred and eleven of the Revised Statutes of the United States, shall be the standard unit of value, and all forms of money issued or coined by the United States shall be maintained at a parity of value with this standard…”

Back then, the price of gold was set at only $20.67 per ounce (48.38 times less than $1,000)!

This week’s stock market free fall has not helped matters either, with the Dow Jones shedding another $152 of muscle today, bringing the value, as I write this, to $7,313.74.

“There really is no other place to go,” says Leonard Kaplan, president of Prospector Asset Management. “People are scared.”

When falling house prices, stock market crashes, unemployment rates, recession, high deficits, fear of inflation, and the fact that the near future is unknown, tangible assets (not abstract investments) flourish.

Gold should continue to be a safe, hedge investment for the forseeable future. But if the recently passed stimulus package and the upcoming bail out impregnates our economy with Obama’s campaign-trail promise of “new hope”, be prepared to re-evaluate your gold holdings: life and the economy with it, can again experience a vast paradigm shift.

Gilding and Glamour Returns to the U.S. Presidency

On Inauguration Day, the new President’s First Lady, Michelle Obama proved herself to be fashion savvy:  matching yellow ochre dress and coat with coordinated gloves from J.Crew.  That night, she wore a one-shouldered white dress by American designer Jason Wu, with 77.6 carats worth of diamonds as she party-hopped all night long from inaugural ball to inaugural ball, dancing with her dashing husband.
The carat count included her earrings, with a four inch drop style; a ring; and a slew of bangle bracelets.  She didn’t need (or apparently want) a necklace with that one shouldered gown.

The jewelry was on loan from Mrs. Obama’s favorite Chicago boutique, Ikram, according to Marla Bell, a spokeswoman for Loree Rodkin, the designer who made the precious gem and gold accessories.  The jewelry, along with her dress, will be donated to the Smithsonian Institution for display.

In case you missed it, let me say it again, those earrings swept her bare shoulders.  They were 60.34 carats all by themselves.  She left her wedding ring back at the White House, and instead wore a knuckle-buster of a cocktail ring: 12.83 carats that was sparkling on her finger all night long.  And that stack of thin bangle bracelets (thank heavens she brought back the bangles! I’ve been waiting for that!) added another 4.43 carats to the weight.

Surely the designer was only being coy when Bell said she “didn’t have a dollar figure for the value of the gems and precious metal creations.”  But of course, there are ways of arriving at such a number.

For instance, one reporter checked at the Moody Blues boutique in Scottsdale, AZ, which carries that same designer’s line of jewels.  A chain necklace with just a mere three carats of diamonds there comes in at $21,000, according to sources.

So, if you extrapolate from there, Mrs. Obama was wearing about $543,000 worth of diamonds and precious metals.  That’s a trend almost any woman would like to get behind!

Michelle Obama is rapidly becoming one of the most visible and inspirational women in our world.  She’s already attained international role model and fashion icon status.

Perhaps an era of bejeweled status has returned to our nation’s capitol?  Some fashion mavens are suggesting that it has been fifty years, since the Kennedy Presidency, that such glamour and dazzling filled our eyes.  But others say the *bling* has been more recent, if a little less obvious.

By the way, if you don’t have $543,000 to spend on jewelry to match your ensemble, we’re certain we can help you find something smaller and more scaled to your pocketbook in this “era of change.”