Gold remains in narrow trading range

By Pete Southern in LiveWire Economics Blog | August 26, 2009 14:29 |

The price of an ounce of gold has remained fairly steady, in the $900 range, since May. The current spot gold rate in early New York trade is $947.80 per ounce, a gain of $2.90 so far on the day.

As has been the case in most other speculative markets since the early part of the summer, prices have remained constant as investors and analysts watch closely for a sign of economic movement. The difference with gold is that unlike equities and other most other investments, its spot price tends to move inversely with the dollar. As dollar sentiment improves, speculators flee gold, which is most often seen as a safe, less risky investment for lean times.

The price of gold gained significantly in London trade after its New York close of $944.90 Tuesday (August 25). At one point, gold was worth nearly $960, but the price dipped sharply at the start of New York NYMEX trade as the dollar remains firm in the short term against its European counterparts.

Since crossing back over the $900 threshold in early May, gold traded to a peak just over $980 in late May, early June, but it dropped back below $920 in late June and has remained in about a $60 range since then.

On a 60-day chart, the high mark for gold was $967.70, and the low price was $908.50. A look at the six-month charts shows an even more considerable illustration of the narrow trade as the high was $981.10 and the low point was $868.70, a range of just $112.40 during that timeframe.

Long-term gold rate charts still show a very definite upward trend. Gold has consistently delivered one of the best annual rates of returns since 2000, with investors earning about 16 per cent per year over the course of about nine years.

It has been widely publicized that James Turk, a leading analyst of precious metals, and the founder of leading site, believes gold could grow to several thousand dollars per ounce within a few years. Some have scoffed at the notion since the all-time high is $1,020. Turk’s reasoning is that gold has not been adequately adjusted for inflation over time as some other resources have been.

The emphasis on gold trade in the broader investment arena has been much greater the last few years as investors, and countries, have looked to remain grounded on secured investments. Most strong world economies maintain a significant portion of financial reserves in gold. The biggest contradiction to Turk’s notion of much higher gold would be if the dollar-gold relationship holds true should an economy recovery take place later this year and into the next. Recent history dictates that a stronger dollar means flat or lower gold.

Neil Kokemuller
9:24 AM EST
Wednesday, August 26, 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. He is also in house stock market commentator at Live Charts UK, where you can find real time charts and share prices.

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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