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.

Tags: u.s. dollar and the price of gold

Category: Gold Prices