Daily News

February 13, 2010 – In spite of news reports, market surveys and other self-proclaimed “expert opinions”, there is a widely expected surge in gold investment expected in 2010. While recent news of the sovereign debt crisis in Greece, tightening money policies in China and economic disaster in the United States has affected prices in the short-term, demand and long-term prices keep coming back, suggesting that bad economic news affects risk aversion, not demand.

In spite of the debt crisis that is affecting investor opinions of Greece, Italy, Portugal and Spain, gold has only experienced a price correction during two months when the US has risen. In fact, gold’s closing price of $1,093.40 is extremely close to where it traded in mid-December shortly after reaching its all-time high. Gold experienced a strong jump in prices this week as news of a possible solution to the crisis was released, showing that demand is high even when investors are concerned with current events such as the EU actions and moves by the Chinese to tighten their money supply.

There are upcoming factors which favor increasing gold investment as well. Fundamental metrics such as the Relative Strength Index and Moving Average Convergence/Divergence indicate that gold prices are ready to move higher. These metrics suggest that gold is currently oversold and that support exists in demand and other factors to push higher market values.

Also, the US economy is in no position to constrain gold prices. Tom Winmill, president of the Midas Fund suggests that the current prospects for the US economy make further rises likely in 2010. Winmill was quoted as saying, "The Fed won’t be able to raise rates, given the employment situation and current fiscal burden. Conditions are in place for higher gold prices.”

Given the current instability in the world economy with the European problems and the Chinese and US governments' preoccupation with inflation, prices are likely to climb. As prices go up, there is likely to be a surge in gold investment in 2010.

Daily Updates Archive

Stewart Lawson

Senior Staff Writer - Gold-Investment.info