Gold and the U.S. dollar are sitting on opposite ends of a seesaw and the dollar is dropping. Investors are finding that gold and related exchange traded funds (ETFs) are prudent way to store wealth.
More investors are buying positions in gold for the long haul as gold prices have risen 21% for the year on a weak dollar and a surge in government debt, comments Goldbug for Gold News. Where gold is going is a matter of debate:
- Darren Heathcote, head of trading at the Australian section at Investec Bank, says investors are craving diversification and gold is becoming a popular avenue of investment. (Why gold is up).
- Citigroup (NYSE: C) recently put its stamp of approval on gold, announcing an increased six- to 12-month estimate for gold prices from $975/ounce to $1,025/ounce. The decision was based on a weakening U.S. dollar, increase in investor demand and diversification of the dollar reserves and portfolios. (Play Jim Rogers’ views on commodities).
- Historic trends show October to be a slow month for gold and some market observers project a drop in prices, writes Goldbug for Gold News. However, the depreciation of the dollar may continue and offset any sharp correction in gold prices.
- Adrian Koh, analyst at Phillip Futures, explains that a weak dollar invokes fears of inflation and investors are purchasing gold as a hedge. Without any sure changes in the fundamentals for the dollar, gold is likely to stay up.
Where gold ultimately goes is a question that can’t be answered, but investors can take matters into their own hands by protecting themselves with an entry strategy and a stop loss. Read about our trend following discipline here.
For more information on gold, visit our gold category.
- SPDR Gold Shares (NYSEArca: GLD): up 19.5% year-to-date
- iShares COMEX Gold Trust (NYSEArca: IAU): up 19.5% year-to-date
- PowerShares DB Gold (NYSEArca: DGL): up 18% year-to-date
- ETFS Gold Trust (NYSEArca: SGOL): up 6.5% since inception
For full disclosure, Tom Lydon’s clients own shares of GLD.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.