Friday, May 22, 2009

Today in Gold: Friday, May 22

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 rises above $960 as dollar wilts"
Author: Felix Salmon

Main Points: Gold finished a strong week by settling up $7.70 to $958.90 an ounce. The price was able to slip past $960 an ounce briefly during the day for the first time since March 20.

Gold benefited from further weakening of the dollar versus the Euro.

Analysis: It was quite the week for gold, which was up every day accept Monday. Week over week, gold finished up a shade less than $30 below last Friday's $931.30 an ounce finish.

More impressively, gold has finished up eight of the last night days, rising approximately $45 since the end of last Monday, May 11. Maybe the gold bugs were right. Maybe, just maybe, gold will now be able to sustain some momentum after months of failing to live up to the hype.

Or maybe not. Time will tell.

"Gold Prices in Danger of Falling From Year’s High Point"
Author: Mike Caggeso

Main Points: Although Caggeso has confidence in gold as a long term investment, he expects some falls -- potentially dramatic -- in the short term. Gold is in the midst of a rally, approaching record highs, but two scenarios could significantly alter the short term path of gold.

1) US Federal Reserve will raise interest rates. Rates are currently very low, which has weakened the dollar and benefited gold. Once the economy improves, however, rates will be raised. This will increase the value of the dollar and hurt the investment in gold.

2) International Monetary Fund will sell large sums of gold. The IMF is the world's third largest holder of gold, and it has been rumored that they are on the verge of cashing in on the current gold price. Such a move would likely result in a dramatic drop in the gold price.

Analysis: The IMF scenario has been discussed here before. It is about supply and demand. If the IMF suddenly infuses mass amounts of gold back into the supply, the demand drops. Projections have the gold price going as low as $700 in this case.

As mentioned many times, the best time to sell gold is when you need the money. Gold will drop again. Gold will rise again. If you do not need the money now, it is a very safe and stable investment. If you are planning to sell but hoping to capitalize on a higher gold price, it is a risky proposition.

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