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5 February 2010 – Capping off a difficult two months of battling a strengthened US dollar, gold has experienced a painful drop in prices as many investors sold based on technical factors. While gold has dropped to $1,060 per ounce, analysts foresee a new rally looming in the second quarter of 2010 that could possibly erase the losses of the last few days.

After peaking near $1,115 early in the week, gold investment stumbled. Wednesday morning gains became losses in the afternoon, followed by a large $45 drop on Thursday. Friday morning prices have remained steady, but the $55 loss represented a notable 5% reduction for the week.

The dollar has affected other commodities as well, with the Reuters-Jefferies CRB Index of 19 raw materials falling 2.6%. The national debt woes in countries like Greece, Portugal and Spain have been key to the dollar’s rise.

This is seen by many as a temporary condition; neither the US dollar nor the nation’s economy have strengthened in substantive way, rather investors are focusing on the worse conditions in the struggling EU countries. As investors turn their attention again to the weakness of the dollar and the uncertain US economy, a switch is likely to occur.

What this means for gold investors is that now is not a time that calls for panic; instead it is an opportunity to pick up additional holdings at lower prices before any rally takes place. A strong option in the current environment is bullion, a gold investment that is liquid and can be bought and sold at reasonable prices through certified gold exchanges. While the dollar has experienced its run, signs appear favorable for a swing in the direction of gold as early as next quarter. 

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Stewart Lawson

Senior Staff Writer - Gold-Investment.info