Wednesday, March 25, 2009

Today in Gold: Wednesday, March 25

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 prices advance as investors buy on recent dip"
Author: The Associated Press

Main Points: After dropping two percent the past two days, gold for April delivery rose $12 to $938 an ounce today. The drop occurred when investors became more confident in riskier investments, but that doesn't mean they are abandoning gold.

"As much as things look better than they have over the past several weeks, that does not mean we're out of this recession yet," said David Meger, director of metals trading at Alaron. "And based on this premise, there is room for gold in people's portfolios."

Analysis: The increase today came largely as an adjustment as gold had previously dropped while being temporarily ignored. As Meger explains, the days of buying gold as a safe haven investment are far from over.

"Gold Price May Top Record on 21% Investor-Demand Rise, CPM Says "
Author: Millie Munshi

Main Points: In 2008, investor demand for gold increased 21%, a current record. However, research CPM expects that record to be quickly broken this year. They expect demand to rise from 43.3 million ounces in 2008 to 52.3 million ounces this year. That rise borders the record set last year.

Analysis: As has been documented before, supply needs to keep up with the increased demand. Old mines are closing and international banks are holding tight to their gold.

"Why The Gold Price Is Not Yet Soaring"
Author: Tim Iacono

Main Points: While gold has done relatively well of late, it is a bit surprising that its price remains in the mid $900s per ounce given the current environment. The country is embroiled in a financial crisis -- typically favors the price of gold. Recently, the Fed announced that it will buy print more money -- also favorable for the price of gold. So why is it still below the record set last year?

Among other explanations, one theory is that the increased demand for gold as an investment can't offset the evaporated demand for jewelry. During tough times, people buy less jewelry and will be less willing to spend lavishly on their gold items. Therefore, gold overall is relatively flat.

Analysis: We've covered this gently in the past, but it may help explain why many have conservative projections for gold. While inflation or deflation will help the price of gold, further difficulties with the economy will not help. They balance out, which partly explains why gold is such a stable investment. By definition, gold won't lose significant value, but counter forces keep it from rising swiftly as well.

No comments:

Post a Comment