Gold Quietly Moving Towards $1,000

By: LiveCharts

As the dollar has faltered recently, gold speculators have been among the winners of this financial trend. Along with several major currencies, including the Pound and Euro, gold rates have trended higher since mid-to-late April as the Fed maintains a zero per cent funds rate, and the economy remains sluggish.

The gold spot rate is currently $926.60 per one troy ounce. This is nearly $60 over the rate in the middle part of April, when gold was running around $860-880. It is a little less than $100 off the all-time high of around $1,020. After reaching this high mark in late 2007, the precious metal dropped back to $700 before a steady up-and-down climb back to the current rate.

The near-term direction of gold is open to debate. Gold has had nearly a 17 per cent annual rate of return that has dragged on for eight years. Investments in gold have consistently performed as well as any other common type of investment since 2000. It has performed especially well against the dollar in the last few years as the greenback has struggled with the sour US economy and low interest rate yields.

Given verbiage from Fed Chief Ben Bernanke and others, it would seem as though the US economy should be on the road to recovery by the end of the year. This suggests that safe-money investors who jumped out of stocks and other risky investments may pull money from gold when they are more comfortable in growth investing.

However, there is still some uncertainty over recovery prospects in many major US market sectors. Hopes for a housing rebound took a hit Tuesday (May 19) as new home building saw its all-time low water mark. There is also still unease about the credit sector. The US car industry is in constant turmoil. Unemployment is near 9 per cent. So, all is not well again in the US economy.

With the multitude of ongoing economic battles it is likely that the Central Bank will maintain its zero per cent fund rate policy for some time. This creates a low yield for the dollar, making it a less desirable long-term investment for currency speculators because it lacks a daily rollover yield. Holding higher yielding currency investments produces some daily income opportunities to offset the risk of negative trending in the currency ratio.

One sign that gold might still have some major upward mobility is rapid growth in secondary gold markets. Everywhere you look in the US; there are signs for gold wholesalers and other companies looking to buy gold from struggling Americans. These companies pay a modest fee to collect gold pieces in hopes of reselling it at higher prices based on the precious metals spot value. This new market avenue for gold creates another potential catalyst for gold price changes.

Neil Kokemuller

LiveCharts.co.uk

Neil Kokemuller is an Associate Professor of Marketing at Des Moines Area Community College in Des Moines, Iowa, USA. He has a MBA from Iowa State University. He is also in house stock market commentator at Live Charts UK, where you can find real time charts and share prices .

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