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Gold Predictions and Expectations

blogThe price of gold shot up to the $1000 per ounce mark last week and I hope that rocketing upward was as exciting for you as it was for me.  I loved it.   Fun, fun, fun to watch and talk about and consider in reviewing the markets overall.

And then it fell today.  That’s kind of what precious metals do, isn’t it?  It’s a bit more stable than dollars and the rest of the markets, but since the price of gold is tied very closely to strength in the dollars, it’s a little like watching the waves roll in and out, isn’t it?

So what is it reacting to this week?   Gold has lost ground as the dollar gained and oil prices fell slightly, causing the ground underneath the yellow metal to give way just a little.   Did you see that report of a huge find by oil developers in the Gulf of Mexico last week?  That’s part of it.  If a bunch of smaller countries in Africa would stop fighting internally, they might also produce more oil, which might drive the price of oil down further, strengthen the dollar further, and lower the price of gold.

“Gold is in a modest consolidation stage, as the dollar rebounded, ” says Hwang Il Doo, senior trader with KEB Futures in Seoul, Korea.

Modest, indeed.  The price lurched upward to $1011.95 on September 11, but had dropped back to $1002.92 to open the following week.

Of course, many investors think “anything over $1000 is a good price to sell.”  And yet others believe that as unstable as the markets have been for the past year, this is a great time to buy.  Who is offering such advice?  Some fairly big name companies.

UBS AG told its investment clients to sell gold and silver, citing a jump in speculative buying of these precious metals.

“Considering the speed of the increase and on the absolute level of the net speculative position, we are cautious about the near-term outlook for the gold price, wrote John Reade, UBS analyst in a note.  “We recommend nimble investors take any profits on any long gold and silver positions, looking to re-enter after a correction.”

UBS is standing by its predicted price of $950 for September, but says it expects gold to rise sharply in 2010.   So perhaps buy now, and consider your position again in the coming year.

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