Friday, March 20, 2009

Today in Gold: Friday, March 20

Each weekday, Cash4Gold will troll through the web's gold banter and post some of the bigger or more interesting stories. Following is a run-down of today's features:

"Gold Falls in New York as Dollar Rebounds; Silver Advances "
Author: Pham-Duy Nguyen

Main Points: The dollar rose today for the first time in nine sessions. As has generally been the case until this year, gold took an opposite turn. It is expected that the inverse correlation will become more commonplace once again when the Fed follows through on its promise of buying up bad debt.

"The dollar has always been one of the most important drivers for the gold market," said Frank Lesh, a trader at FuturePath Trading LLC. "The dollar is oversold. If the dollar comes under pressure next week, gold can climb to $1,000 an ounce."

The price of gold hardly took a "dive," falling a mere $2.60 to $956.20.

Analysis: Considering the astronomical leap a day ago, a minor correction shouldn't be considered much of a surprise. A rise back to $1,000 in the near future is a distinct possibility.

"Barclays lifts 2009 gold price view to $940/oz"
Author: Jan Harvey

Main Points: Barclays Capital increased it's projected average gold price for 2009 to $940 an ounce from $920. The change is driven by fears of inflation and a further weakening dollar.

"Plans for further quantitative easing by the United States has seen the dollar nosedive," the bank said in a note. "In that environment, gold will shine, and we have revised our price forecast higher."

Analysis: This is in line with another recent conservative projection alteration by Citigroup. Given that the price of gold is currently hovering around $950 and economic conditions are expected to decline (thus favoring the price of gold), wouldn't a more aggressive stance make sense?

"A gold bubble may well be coming our way"
Author: Martin Hutchinson

Main Points: The record price of gold occurred in 1980. At $875, the price would actually be closer to $2,300 in today's dollars. That price was driven largely by inflation -- a slow inflation during the 1970s.

However, today's prospects for inflation are different -- expectations are that it will occur quickly, not gradually.

"Including the Fed’s March 18 announcement of further monetary stimulus, monetary and fiscal policies in the US and globally are far more inflationary than in the 1970s. Consequently, there’s a real threat that if inflation returns, it will do so violently."

Analysis: Potentially good for the price of gold, bad for the dollar. This article also attempts to debunk the notion we've previously visited about gold having "irrational" value -- the value is real, particularly as a hedge.

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