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As the recent run by the US dollar appears to be subsiding, many analysts expect gold investment to rise in 2010. The unexpected strength of the dollar against a number of foreign currencies had a stagnating effect on gold prices, which experienced their ninth year-to-year increase for 2009. As concerns about the economy and the deficit return, attention will likely move away from the dollar and create new interest in gold investment.

Post-State of the Union activity suggests that the gold market heard the message behind the message in President Obama’s speech; the budget and deficit will continue to soar and the government plans to keep flooding additional money into circulation as it tries to prop up the struggling economy. This message means disaster for the dollar, which until recently has been fighting a losing battle to avoid devaluation.

A weaker dollar generally means higher gold prices. Traders move to gold investment during times of economic crisis because asset-based gold traditionally offers an excellent hedge against inflation, a condition which economists fear to due to a saturated monetary supply and extremely low interest rates.

A strong strategy for many people today is to increase their gold investments in 2010 by purchasing bullion or certified gold coins. Stalled expansion in the Dollar Index will renew the fears of many people in the dollar’s security as an investment, leading to a probable upswing in gold purchases. Investors should look to increase their holdings in bullion (as a possible short term solution) and certified coins (for the long term) prior to any substantial increases in the gold spot price. 

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Stewart Lawson

Senior Staff Writer - Gold-Investment.info