Monday, May 4, 2009

Today in Gold: Monday, May 4

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:

"PRECIOUS METALS: Comex Gold Lifted By Inflation Fears, Charts"
Author: Allen Sykora

Main Points: Gold finished the day at $902.20 an ounce, up $14 since Friday. Holidays in London and Tokyo made it a quiet day overall, but the rise in the gold price is attributed to a weakened dollar and inflationary fears.

With signs pointing to a rebounding economy, inflation could be right around the corner. And, as has been established, gold is often purchased as a hedge against inflation.

"We're seeing more indications of perhaps a bottoming in the economy," said Bill O'Neill of LOGIC Advisors. "So there is an increasing - and it will continue to increase - concern surrounding inflation potential."

Analysis: The trend the past few weeks is that gold is unable to sustain momentum above $10-20 over $900 and tends to bottom out around $880-890. So, if the trend continues, gold could potentially rise again tomorrow, but its immediate ceiling may be limited.

"Gold prices may go to a bottom: Jim Rogers"

Main Points: According to commodities investor Jim Rogers, the International Monetary Fund's decision to sell 403 metric tons of gold could cause the price of gold to plunge to or below $700 an ounce.

"The fact is that IMF is trying to get permission from everybody to sell gold," said Rogers. "I don’t know it will succeed or not. But if and when IMF sells its gold, gold prices may go to a bottom. Who knows? It may go down to $700. IMF has got a lot of gold to sell. If it does, I hope I'm brave enough and smart enough to buy more."

The IMF is the largest holder of gold behind the US and Germany. Therefore, such an action would make a significant impact on the market.

Rogers owns some gold, but says he won't buy more until the price drops.

Analysis: In other words, gold is at or near its peak. Something to keep in mind is that the IMF first proposed such a sale in 2007 and it was approved in 2008. It hasn't yet happened -- and it may not happen. But if it does, the price will drop quickly due to new supply in the system.

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