Price of Gold on a Rise - Investing Now
by: makalagold@gmail.com
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Historically, gold has been considered a safe-haven for investors jittery about inflation or the economy.
With skittish investors diversifying their portfolios with commodities, demand for gold has shot up. During the summer's market meltdown, prices remained modestly higher compared to the start of the year before moving higher in recent weeks. Just last week, gold hit $744.80 an ounce - its highest level in 27 years.
So far this year, gold prices are up about 22 percent to nearly $750 an ounce - helped by the declining dollar and growing interest from institutional investors.
And given a confluence of factors, including heightened seasonal demand, analysts believe that prices for the precious metal will move higher still and are poised to shatter its all-time record.
All signs point higher.
Many analysts say the biggest driving factor has been the weakening dollar. A weaker greenback makes gold, which is priced in dollars, more attractive to buyers outside the United States.
Rallying investors drunk on Fed cut
At the same time, worries about inflation have also stoked gold prices, according to Jon Nadler, an analyst with Kitco.com.
Indeed, gold typically attracts investors looking for a hedge against inflation. That factor has become especially important now with oil prices near record highs and after the Federal Reserve cut interest rates last week for the first time in four years.
Of course, if interest by institutional investors or hedge funds wanes or consumer demand for jewelry slackens amid weakened consumer spending, gold prices could move right back down, according to experts.
By some analysts' estimates, gold prices are headed for $750 an ounce by the end of the year.
And gold could find even more support at the consumer level. Typically, the period from September through year's end sees demand for gold climb in the United States amid the holiday shopping season. Demand is also high in India, the world's largest consumer of gold, because the next few months are a popular time for weddings and mark the celebration of the Hindu new year.
Peter Spina, an analyst with GoldSeek.com, speculated the price could even top its all-time high of $850, set in January 1980.
"It's easily within reach by year's end," he said.
Granted gold is looking more attractive given recent signs of softness in the U.S. economy, though the climate is not nearly as dire as it was in 1980. At that time, the United States was dealing with record oil prices and soaring inflation as well as an unstable geopolitical climate that included the Iranian hostage crisis.
And what would it take for the price of gold to reach the more lofty price of $1,000 an ounce?
That would require a major geopolitical event or another unexpected half a percentage point cut by the Fed, said Carlos Sanchez, the associate director of research at the New York-based commodities firm CPM Group.
"We may get to $1,000," he said. "But there would have to be some serious circumstances."
Gold is quickly reaching the mania phase in China, and there are clear signs of it on the ground.
The Chinese government is promoting gold and silver as investments.
This was ground-breaking news at the time– a clear indication of long-term demand growth, as well as a sign that the government will be accepting higher inflation in the future.
Ironically, this story was little noticed in the gold industry at the time, mostly because the information was only being circulated in China.
Since that report, three things have happened;
First- the mainstream media has latched on to the story about Chinese gold… Forbes, Moneyweek, Reuters, the blogosphere; it’s out there now, and adding a bit of extra buzz to the gold market.
Second- the government has stepped up its promotional campaign, and Chinese consumers have responded on cue. Gold demand has grown dramatically just this year, particularly as savvy local investors are starting to view Chinese stocks suspiciously.
You can buy gold in China at any bank– even tiny banks in tier-3 cities sell gold. The government has also set up official Chinese Mint stores all over the country. On the inside, they look like jewelry shops– armed guards, glass viewing cases, etc. But instead of diamond crusted earrings and white star sapphires, you see bars. Lots of bars.
The government mints bars in sizes ranging from 5 grams (which are so tiny they’re actually cute) to 1 kilogram. The price of gold is updated instantly– they have a Bloomberg screen which tracks the spot price, generally indexed to the Renminbi price in Shanghai rather than New York or London (another sign of Chinese financial independence).
The bars are all serialized and 9999 purity, the same as you would get from Switzerland. They are also certified by the gold exchange, which validates the quality. The premium gold price runs 10 renminbi per gram, or roughly $30 (US) per ounce.
Given the ultra low cost, storage option, and ease of transport, China is a great place to buy and store gold… especially if you find yourself there for business already.
If you are a United States taxpayer, one of the best ways to buy gold is through a self-directed IRA. You will be able to hold physical gold (and even store it overseas), all through your tax-deferred retirement account.
Article Source: http://www.ArticleStreet.com/profile/makalagold%40gmail.com-18852.html
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