Gold pushes over $900 again

By Pete Southern in LiveWire Economics Blog | February 5, 2009 12:45 |

Gold currently (February 4) sits at just over $903 per ounce. The valuable resource it’s steadily rising higher and looks primed for another move over $1,000 sometime in the near future. Gold went over this mark briefly in the middle of 2008 before falling back a couple hundred dollars in the last several months.

It did not take long for the price of gold to surge from $850 to $900. It was January 25th when gold broke back above the $850 point. There has been renewed vigor in many parts of the world to get back into gold, the safe money investment. As global economies continue to struggle, countries that have low gold production capabilities and floundering currencies have seen significant growth in speculative interest in gold.

Interest in gold is certainly not a new phenomenon. Goldmoney.com reported that gold investments gained for the eighth consecutive year during 2008. This makes gold one of the most consistent and positive gains investment opportunities over the first decade of the 21st century. Gold is a rare natural resource that derives most of its value as a reserve holding as opposed to a production resource. Gold speculators have been choosing the safety of gold over other investment types.

US investors have particular fondness for gold in the current market. Data continues to show a weak economy and with another major stimulus bill on the table, economic turnaround is not necessarily going to happen right away. The weak economy and dollar, and low US production of gold, help drive the price of gold higher against the dollar.

One interesting sign of the times occurred with an advertisement during the Super Bowl for a company called Cash4Gold. The company used Ed McMahon of Publisher’s Clearing House fame, and former rap icon MC Hammer as spokespeople in its $3 million Super Bowl investment. The commercial had the celebrities poke fun at their own poor money management prowess and showed them looking through their own gold pieces to send them in for cash. The company sends a check with an offer for people’s personal gold items that they submit through the mail.

Gold will undoubtedly clear the $1,020 high point in reached last year. The only question is “When”? James Turk, the founder of goldmoney.com has suggested may times that gold is going to go much higher. He thinks the economic uncertainty will continue for a while. He also says that gold has significant adjustments to make for inflation that had not previously been factored into the resource’s value.

If the dollar remains weak and President Obama’s new economic stimulus package do not prompt some type of immediate economy reaction, gold may well have a hefty upward potential. The dollar has been holding steady against most major currencies the last week or so.

The Euro sits just below $1.30, slightly above its medium-term low point near $1.25. Many currency speculation forecasts are calling for the Euro to fall below $1.00 at some point in 2009. One Pound is around $1.45, several pips above its medium-term low, yet well below its all-time high of $2.06 achieved in late 2007. The dollar is not necessarily strong, though, as the gold rate suggests, the European economies are simply showing signs of being in a worse position in the economic cycle.

Market Recap

Stocks were up for much of the day on Wednesday before a sharp drop off in the afternoon. The Dow dropped 121 points with the NASDAQ and S&P off by 1 and 6 points, respectively. Gold climbed over $900 per ounce. Obama capped executive pay at $500,000 for companies using bailout money. Cisco earnings were down, with an especially weak January.

Neil Kokemuller
7:09 PM EST
Wednesday, February 4, 2009

Neil Kokemuller is an Associate Professor of Marketing at Des Moines Area Community College in Des Moines, Iowa, USA. He has a MBA from Iowa State University.

Please note: The information provided in this article is intended for informational and entertainment purposes, and not as advice for financial decisions or investments. Actions taken on the basis of the information shared is at the sole risk and discretion of the individual. Currency investment poses significant risk of loss.

Pete Southern About Pete Southern
Pete Southern is an active trader, chartist and writer for market blogs. He is currently technical analysis contributor and admin at this here blog.


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