Summary
1. Recently Gold crossed the mark of $1000 per Ounce. 2. Crude Oil is also on record high of about $110 per barrel. 3. Its because of weak dollar prices. 4. Sales in many countries are all time low. 5. But Gold is now good commodity to invest and getting good return.
Analysis
Spot Gold is all time high after crossing the bech mark of $1000/ounce on 13th of March Gold reach to the new high od $1040/ounce on Monday, gold broke past that record with ease today at $1,008 per ounce as investors abroad continued to watch for more signs to dump their dollar investments as the United States struggles past its economic woes. For the week, gold is up 2.5 percent to $999.60 an ounce, and platinum is up 0.5 percent to $2,068 an ounce.
There is central bank activity going on behind the scenes meant to keep investors from dumping the greenback for commodities. Just as gold leapt past the $1,000 mark, the Federal Reserve Bank injected another round of promised cash to help bank liquidity. The move sent gold lower, briefly, and helped the Dow end in positive territory (up 1 percent) at 12,145.74 Thursday. Trading today was another story as the Dow had lost more than 2 percent (to 11,896.70) by mid-afternoon Friday. Goldman Sachs and Morgan Stanley have indicated that coordinated efforts were put in place this week to boost the dollar at the expense of other economies. The Fed approved dollar swap lines with the European Central Bank, the Bank of England, the Swiss Central Bank, and the Bank of Canada, providing an immediate injection of $45 billion for inter-trading.
Dollar continues to be weak and this coming week the Fed meets (on March 18) to determine whether or not to adjust the short-term lending rate in the United States, which currently holds at 3 percent. It is expected the Fed will reduce the rate again, although new inflation data and Fed fund measures to ease bank liquidity at about $200 billion, have lowered expected rate cuts from a 0.75 percentage point reduction, to perhaps a half-point reduction to 2.5 percent. The rate has been reduced a total of 2.25 percentage points since August 2007. With a lending rate of 2.5 percent it is below the inflation rate of 4.3 percent, in effect producing a negative earnings interest rate. Analysts expect the rate to hold in line with 2 percent for most of 2008, therefore yields on three-year Treasury inflation-protected bonds turn negative and lose purchasing power for investors in the United States.
Meanwhile, inflation for February held steady due to a drop in energy and food prices, according to the government. Record gasoline prices set this week --at $4.00 per gallon in some states and Crude Oil is also on record high of $112/barrel on Monday, will not show up in government figures until the April reading. The government reported consumer price hikes month to month in February and core inflation (excluding energy and food) were both unchanged. As a sign of what is to come, bread products rose 2 percent in February due to rising global demand for food products and investor interest in agricultural commodities, which was the largest monthly increase since 1975. While overall annual inflation holds just above 4 percent, the core inflation, which the Fed uses to gauge the health of the economy and base its rate decisions upon, stood at 2.3 percent. The historic comfort zone for the Fed is between 1 percent and 2 percent.
Sales in most of the countries are all time low while China retail is performing goods in these conditons where there retail jewelery sales rose by 40% this year in January and Feb 08. While India experincing weak sales and for sales to be contiued its necessary to stablis the prices of Gold on any point.
On the other hand it is expected the gold may reach the new record of $1,200/ounce in couple of months and may be $1,500/ounce by the end of this year. So, inverstors still don't losse hopes and can invest in gold to get good results.
