After Us Federal Chairman Ben Bernake announced yesterday that the feds were paying close attention to the change in currency, there was a momentary slight rise in the dollar. At the same time gold reached a new record high as it hit $1144.20 an ounce.  As confidence in the US dollar decreases, the appetite for gold increased causing the price of gold to increase.

With the federal government cutting interest rates to nearly 0%, the confidence in the dollar is steadily dropping. This year alone we have seen the dollar decline 7.4%. After Bernake’s pep talk yesterday, the dollar is up 0.8%.

Gold and the dollar usually have an inverse relationship, meaning that they move in opposite directions. As the value of the dollar decreases the price of gold begins to increase. This may not be evident from day to day but it always holds true over the course of a year.

Yesterday I predicted that gold would increase by $20 this week eventually ending around $1150 by Friday. The unexpected and rare commentary on the United States dollar by Ben Bernake caused a sudden spike in the price of gold. I believe the spike will level off as some investors cash in and we will still see a slow gradual climb to $1150.00 an ounce by Friday. So far this morning we saw gold decline sharply and is now climbing back up. The current price of one ounce of gold is $1135.40.

Many analysts believe that the price of gold will reach beyond $2,000 an ounce next year. This belief comes from the idea that in 1980 gold topped out at $825.50 an ounce before declining. If you were to adjust $825.50 to 2009 dollars this would be around $2150.00 an ounce.

Return to Healthy Financial Habits for up to date news on Gold and other Commodities. Here you will find current news and information that will assist you in making wise financial decisions. As always it is important to consult with a financial advisor before making any investment decisions.

Author: Allen Dukes