Wednesday, April 15, 2009

Today in Gold: Wednesday, April 15

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:

"US gold ends up in quiet trade on physical demand"
Author: Felix Salmon

Main Points: After a day of ups and downs in which the price of gold bottomed at $886.20 and topped at $902.10, the yellow metal ended the session up a modest $1.50 at $893.50 an ounce.

Recent reports that retail prices have dropped eased immediate fears of inflation, a notorious motivator for investment in gold. Even so, Reuters quoted HSBC Chief Commodities Analyst James Steel as a supporter of gold in the immediate future for other reasons.

"Despite the weight of deflationary data in recent weeks, concerns that quantitative easing and rising fiscal deficits will stoke inflationary pressures" and rejuvenate support for gold.

Analysis: The price of gold will ebb and flow with economic reports from the US government and key financial companies. There are certainly endless scenarios that would be favorable for a rising price of gold, but there are nearly as many that would support a plateau and potential downturn. Has the economy hit bottom? Will housing sales pick up? Will banks report improved performance? All of these developments would likely result in a drop in gold price. Will the US print more money? Inflation result? Deflation? Prolonged financial hardships? Weakened dollar? All would benefit gold as an investment.

"Gold Prices 'to surge' at end of bull run"
Author: Goldbug

Main Points: Nick Goodwin, a gold analyst at GFMS, uses history as a guy to project a "very strong acceleration" of gold prices in the future.

Gold, he says, is in the midst of a bull run that began at $250 an ounce in 2001. Near the end of the last bull run in the late 70s and early 80s, there was a sharp upturn in gold prices.

"In the last stages of that bull market you get very strong acceleration in the price and we haven't really seen that here, where you almost get like a vertical climb and it started in sort of late '79 and then moved into '80 and in those last few months you had almost like a doubling in the Gold Price. Well we haven't seen that yet. I think we could still see that coming."

He also claims that the price of gold could reach $1,200 an ounce by next year when inflation, aided by the economic stimulus, takes hold.

Analysis: History is a nice educator, but it does not always help us predict the future. Quite clearly, the environment now is different than it was in the early 80s. Even so, it is a unique point that shouldn't be completely dismissed.

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