For the first time in a while gold had a fairly stable day yesterday as gold buyers and sellers are waiting to hear the word from Federal Chairman Ben Bernake. Gold closed yesterday at $1,123.30 on the New York Mercantile Exchange up $3.90 from the previous closing. The dollar index DYX also had a fairly stable day closing at $76.94 down only $.03 from the previous day.
One of the biggest factors affecting the price of gold is interest rates. Currently interest rates have been hovering near 0% for some time now. If the federal reserve gives a signal as to when they plan to the raise the interest rate we will see a huge sell off of gold and the value to drop off as well. The reasoning behind this is that if interest rate were to raise the value of dollar would also go up and as we all know when the dollar moves up, gold move down.
The value of gold has been up in recent years and especially this year. This year alone gold has increased in value over 30%. Until recently, gold has been making huge gains and setting new record high almost daily. Large central banks such as Sri Lanka and India were buying up large quantities of gold from the International Monetary Fund (IMF). Just when things were really getting hearted up, data for the month of November was released showing signs of a strengthening economy.
Unemployment numbers were lower than analyst expected. In addition retail sales numbers were up much higher than anticipated. With news of a strengthening economy the dollar index also started to pick up. In only one week the price of gold had dropped over $100.
Many gold investors fear the raising of interest rates due to signs of a stronger economy. For this reason any cue that the federal government gives concerning the rising of interest rates will result in a massive gold sell off causing the price of gold to drop.
Check back with Healthy Financial Habits every Monday morning for your weekly gold price predictions. Here you will find current news, information and investment strategies that will assist you in making financial decisions. It is important to remember that consulting with a quality financial adviser is always recommended prior to making personal financial decisions.
Author: Allen Dukes