Gold: To Buy or Sell?

Now that the United States has newly installed President Barack Obama in the White House, many of us thought things would start turning around.  If you were one who had such high expectations, then more’s the pity to you–although it may be too soon yet to tell.  But as expected, with the American dollar fluttering, the price of gold has continued to edge higher… ever higher.

Investors are looking to Washington, hoping for help.  The stimulus plan that President Obama has talked about has been discussed through the weekend, with everyone bringing their concerns (and amendments) to the table.

These types of worries are going to be with us for awhile.  And yet in times of uncertainty, the price of gold has always provided a hedge against instability and economic worries.  Gold has now topped the $914 mark in New York.  Other precious metals also are up with silver at $13.16 and copper up again to $1.65 per pound.

Investors who are holding their breath for a recovery may be holding their breath for some time to come.  Virtually no one, not even President Obama himself, believes the fix is in the stimulus package.  There is no “magic bullet” the President told Fox News this past week.  But working with Congress on this economic package, “we are closer to getting it right.”

Whether it’s time for you to buy or sell, only you can say.   But keep in mind that gold’s value as an investment has always held up, even in the worst of times.  And we must all hope and pray that these are not those.

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.

Platinum and Gold: When Metals Collide

Although platinum is 30 times rarer than gold, the two metals’ prices collided throughout the day and finally closed with gold at $822 per ounce and platinum at $823! Today’s $1 spread was nothing short of historical for precious metals; the last time platinum and gold met at such close quarters  was 1996!

Platinum has plummeted 65% for the year; gold has dropped 21%–making platinum next year’s bargain.

Metals had already seen a decline due to decreased consumer demand as a result of the economic downturn.  Adding to the ailment, platinum prices dropped further after the U.S. senate rejected a “bail out” for automakers today–deepening platinum’s fall from grace because of decreased demand for platinum in automobiles who use platinum for catalytic converters.

(Bloomberg) — According to London based metals refiner, John Matthey Plc, automakers make up about half of the world’s platinum and palladium demand. In 2006, North American automakers used 905,000 ounces of platinum.

According to Derek Engelbrecht of Impala Platinum Holdings, “the agony will continue in 2010″, if platinum miners in South Africa, who account for almost 80% of the world’s platinum supply, do not cut production. Without it platinum will, at best, stay at equilibrium or continue to decline.

2009-2010 will be the year of platinum jewelry as a direct result of decreased platinum jewelry prices. Perhaps now is the time to trade in your gold coins and buy that high-end platinum and 18k gold wedding band!

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.