What Has Been Happening to Gold?

Source:

"The rise in the dollar and gold's sharp decline in dollar terms have overshadowed the fact that gold prices have stayed strong in the local currencies of large consumers such as India and Turkey," Blanchard Chairman and CEO Donald Doyle says. "Even in Euro and sterling terms, gold is still trading significantly higher than it was a year ago."

As the global financial crisis continues to unwind, many investors and market observers have been scratching their heads as to why the price of gold - often considered a key safe-haven investment during times of uncertainty - has declined. The analysts at Blanchard and Company offer an answer and predict where the metal is headed over the coming quarters.

First and foremost, says Blanchard Chairman and CEO Donald Doyle, is the sudden and unexpected strength of the U.S. dollar, particularly in light of the world's financial system on the verge of a total meltdown...

"The rise in the dollar and gold's sharp decline in dollar terms have overshadowed the fact that gold prices have stayed strong in the local currencies of large consumers such as India and Turkey," Doyle says. "Even in Euro and sterling terms, gold is still trading significantly higher than it was a year ago."

...physical demand for gold is robust, and investors have been paying abnormally high premiums for gold bullion due to the lack of tangible supply in the marketplace, Doyle says, and much of that influx of money into gold is coming from stock mutual fund withdrawals that are looking for a safe home.

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