Gold Prices Up over Weak Dollar

Gold prices are hopping, once again.   Amid months of downturn in the economy and worries over weakness in the dollar, the price of gold has turned and gone upward, increasing the metal’s appeal as an alternative investment.   But there’s more to it than that.

Analysts say that gold mining companies are seeing an increase in profits, up 84% at Newcrest Mining Ltd, (Australia’s largest gold mining company) which says sales are soaring.

The American dollar is reportedly under fire, according to the Irish brokerage, GoldCore Ltd, which said in a note to clients, “Gold is taking up the slack.”

We’ve all been watching the play back and forth between gold prices and the economy and wondering how it would play out.

“Gold prices continue to track currency movements and bounce back above the $950 an ounce level,” according to Suki Cooper, an analyst at Barclays Capital in London.

U.S. retail sales fell 0.1 ercent in July from June, according to the U.S. Commerce Department.  Most economic forecasts had called for an increase of 0.8 percent.

The economic situation is confusing, to say the least.  The Federal Reserve has extended its program to purchase U.S.  Treasuriers, or so-called “quantitative easing” for another month as they aim for a smooth transition in the markets.  And the Fed left the target rate for overnight bank lending at between zero and 0.25 percent, near record lows.

So the Fed is trying to transition the government’s involvement out of the markets, but not feeling strongly enough to withdraw completely.  What’s next?

Gold “should remain supported by the inflationary impact of the Fed’s rate decision, in addition to the boost to general risk sentiment,” according to James Moore, analyst at TheBuillionDesk.com in London.  And expectations for a weaker dollar over the next six months continue, with the price of gold likely to stay aloft through that period.

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.