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Gold below $1,200 despite US, dollar concerns

8 July 2010

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.

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Forex Trading     Exchange rates     Dollar exchange rate     Pound exchange rate     Euro exchange rate
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