Investors Still Seeking Gold
Source: Minyanville, Kevin Grewal (5/13/10)
"more than just an insurance policy. . .potentially 'the golden ticket'"
Typically, this time of the year is slow for gold; however, the highly sought-after commodity has been on the move, causing some analysts to call the shiny metal the world's new currency reserve, and hint that this elevated trend is likely to continue.
Despite the recent $1 trillion bailout move in Europe, concerns continue about the eurozone's fiscal health continue to fuel overall market stress.
A second force that's likely to support gold prices is the slow and steady recovery of the U.S. economy. Granted, employment numbers are improving, as illustrated by the fourth straight weekly decline in first-time claims for jobless benefits, but the Fed continues to print money to support the recovery efforts. In fact, the Fed doesn’t expect the overall unemployment picture to significantly improve until sometime next year.
To add more stress to the U.S. fiscal overview, the U.S. trade deficit continues to widen. The Commerce Department recently reported that the trade gap rose to a seasonally adjusted $40.4 billion in March, illustrating that imports continue to supersede exports. This imbalance generally carries trading costs which could further dampen the stability of the U.S. dollar.
Lastly, gold continues to defy the trends of only rising when the U.S. dollar falls or risk appetite diminishes. This indicates that investors are utilizing the precious metal as more than just an insurance policy and could potentially see it as "the golden ticket" asset that holds its value.