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Gold Below $1,200 Despite U.S. Dollar Concerns

Commodities / Gold and Silver 2010 Jul 08, 2010 - 02:47 AM GMT

By: LiveCharts

Commodities

It is a bit unusual, but gold prices are currently falling in line with US economic concerns, equity index drops, and dollar losses.  Typically, gold is known as the “safe money” investment when there is economic uncertainty.

The Wednesday (July 7) morning gold price spot rate is $1,193.50.  This is down slightly from a Tuesday close of $1,194.10 and it is sharply lower from Monday’s New York closing price of $1,208.90.


The dollar generally moves counter to the price of gold but the value of the greenback has been down this week as well against most major currencies.  One Euro is worth over $1.26 in Wednesday morning trade, the Pound is around $1.51, and the dollar has dipped to around 87 yen.

Many top analysts have suggested that as gold surpassed all-time highs just a couple weeks ago, it ran into some pretty fierce technical challenges.  Gold topped out at $1,261 on June 27 and has fallen around $70 in just ten days.

Similar to other speculative markets, gold prices have periods of correction where traders take profit and account for strong growth, which gold has definitely seen in the medium-to-long terms.  Many gold owners likely viewed the near $1,300 level as a good time to get out of their investments.

Despite the strong profit-taking, the long-term outlook for gold remains positive.  Strong support is likely to show up within the $1,150-plus range.  The Gold Survey 2010, released by the World Gold Council and GFMS Limited shows most in the industry see a likely break of $1,300 per ounce later this year.

Fundamentally, conditions seem ripe for higher gold prices as well.  Gold remains the investment of choice for speculators fleeing higher risks with investments like equities and currency trade. 

The US economy is still suffering from unemployment and lack of jobs growth, making it likely the Fed will not raise interest rates soon.  This is going to keep dollar gains under wraps, which is usually a positive for gold prices.

While the long-run prospects for gold may likely depend on the global economy’s resilience in the next few years, the short-term profit takers have humbled the ambitious metal.

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 .

Copyright © 2010 Live Charts

Please note: The information provided in this article is intended for informational and entertainment purposes, and not as advice for financial decisions or investments. Actions taken on the basis of the information shared is at the sole risk and discretion of the individual. Currency investment poses significant risk of loss.

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