The price have gold has moved little in the last few months as investors await signs of a return to normalcy for global economies. The safe money investment, gold has been sitting in the $900 to $975 per ounce price range for the last two months. The current spot rate is $907 per ounce.

After peaking at $1,020 last year, the price of gold dipped back to near $700 in early November before a gradual climb back above $900 early this year. Movement has been stalled in recent weeks as signs of a more stable global economy have halted speculation that has pushed the gold rate higher.

A unique resource in that it gains its value largely from speculation as a holding reserve, gold has long been the investment many turn to during uncertain economic times. When paper money and coins lose their worth or face uncertainty, gold manages to remain a desired commodity. As markets fell during 2008, interest in gold climbed. Gold moved impressively during 2008 because of its strong inverse correlation to the dollar.

Because the US has less natural production of gold, gold tends to gain significantly when the greenback struggles. Goldmoney.com, founded by James Turk, a leading analyst on gold speculation, reported earlier this year that gold has generated a remarkable 16 per cent annual rate of rent this decade. This is very strong compared to other potential investments during the same timeframe.

A look at short term gold charts shows that the upward trend of gold has been stalled for a couple months. Speculators appear to be in the same wait-and-see-mode that investors in other markets are. Economic data lately has started to show potential signs of a bottom in the US economy. Collaboration among G-20 leaders Thursday (April 2) also raised hope as there was universal agreement to continue to infuse whatever funds are necessary to spark the global economy.

Longer-term gold charts show the potential for a reversal if gold is not able to push higher in the near-term. On a 5-year chart, gold appears to have the potential for a double-top in the current range. Gains stalled in early 2009 near the $1,000 mark, before dropping back to $700. On a 20-year chart, gold has shown relentless upward trending since 2000, but a definite holding pattern is present at the current rates.

It will be interesting to see what develops in the next several months for gold. Despite some forecasts for gold rates in the thousands by 2012-13, a turnaround in the economy seems almost certain to lead gold speculators to enter more risky investments, like stocks.

Neil Kokemuller
10:13 PM EST
Thursday, April 2, 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.
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