Wednesday, April 29, 2009

Today in Gold: Wednesday, April 29

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 rebound as dollar falls, stocks soar"
Author: Sara Lepro

Main Points: Gold is up $6.90 to finish today at $900.50 an ounce. The rally back over $900 is thought to be driven by a weakened dollar and fears associated with the swine flu.

Analysis: This is why yesterday's results are so curious. There were also fears of the swine flu yesterday, yet the price dropped nearly $15 by Tuesday's close. Make no mistake, the main driving factor here is the strength of the dollar, which rather consistently has an inverse relation to the price of gold.

"Flu New Threat to Global Finance"
Author: Rob Cox and John Foley

Main Points: In 2003, the SARS health scare impacted the tourism business, but the economy overall could sustain it. This year, such a panic as a result of the swine flu could cause significant problems for a fragile world economy that already has cracks in its foundation.

The industries already suffering have a new problem on their collective plate. Any industry dependent on trade, transportation, tourism and lodging is taking yet another shot to the ribs.

Analysis: How does all of this have anything to do with gold? Poor economic times help the gold price, as investors turn to the safe haven. If the swine flu is not easily contained, gold should benefit due to the repercussions felt across the tourism industry.

This article also discussed why China, which holds a small gold reserve, is unlikely to make a major investment in the yellow metal even during these times. Since the US holds 80 percent of its foreign reserves in gold, a large investment by China will spike the gold price, thus greatly benefiting the US. In fact, if the price of gold were to increase 10 fold (though unlikely), the US would be able to profit enough to erase their $2.5 Trillion debt.

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