Gold Cautious as Dollar Rises
| by Michael Locklear
October 9, 2012 – Continued concerns over the euro zone’s economic stability push the euro lower as the dollar strengthened. In a meeting on Monday of the euro zone finance ministers they decided that Spain would not need a bailout at this time due to the fact that they believed that that country was able to stabilize its own capital markets without further assistance from the European Central Bank at this time. This was not good news for gold investors since it signals more stability than expected in the euro zone. Additional news concerning Greece in their debt issues have helped push the dollar higher after an announcement that international lenders would extend the time period to allow Greece to take further actions to reduce its deficits.
As the dollar becomes stronger investing in gold becomes more expensive which in turn is reflected in lower prices on the spot market for gold. The spot price for gold today is at $1766.50 per ounce. This is a significant drop from last week’s bullish push toward the $1800 per ounce price. Better than expected job numbers and increasing value in the dollar as investors are a little hesitant as they continue to consolidate and await new insight into global economic factors that will have them return to a more bullish position toward gold investing.
Analysts are predicting that recent moves by central banks to expand a loose monetary policy will continue to keep gold prices firm as they make some temporary price adjustments. The United States Federal Reserve’s most recent monetary easing policy to spend $40 billion per month and effort to shore up the housing market and improve US job numbers still offers a positive environment for further expansion into gold by investors. Some marketing experts see the recent improvement in the value of the dollar as temporary and they say the forecast for continued rising gold prices is a certainty.
As the global markets continued to be concerned about the economic strain on the economies in Greece and Spain, investors have increased positions in U.S. Treasury bonds backed by the dollar. Analysts however see the primary impetus behind the rise of the dollar has continued near zero levels of interest rates with which in the United States are at a negative level. Low interest rates are a prime environment for gold investors. Since very low real interest rates offset the negative effects of possible inflation and offers the opportunity of lower premiums for those individuals looking to invest in gold. Continued efforts by several central banks to keep their monetary policies loose have helped gold to rise in price more than 13% this year.
Although the gold price may continue to consolidate in the immediate future the long-term picture for gold still remains very strong. The majority of analysts still expect the price of gold to move beyond the $1800 ceiling and head towards a possible $2000 per ounce by the end of the year. There are a lot of factors consider in the global economy for gold investors as they are pausing temporarily to assess their positions.
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