Tuesday, November 17, 2009

Article Summary: 'New Normal" for the Gold Price?

Over the past week or two I've been helping an exchange grad student at the local university summarize articles for his Literature Review class. Doing so, I realized that it's entirely possible to get a seven page article down to a few paragraphs. Therefore, for several reasons--to save you time of finding articles, to save you time reading articles, and to save you from reading my opinions only--I've decided to start summarizing a few others' articles to give you a different angle on things.

Peter Cooper, writing for Arabian Money, posted an article on November 4 commenting on the surging gold price. The article give his predictions, views, and even a bit of investment advice.

Cooper (2009) states that with gold standing at $1080 at the time of writing, another jump in the gold price seems almost certain. However, saying now that gold will jump to $2000 might be similar to the Kremlin declaring in July 2008, when oil was $147 per barrel, that oil would jump to the $200-250 range. Gold, though, is not just on a temporary spike as oil was. For this to be a spike we'd need to see $1500 gold, or higher.

Cooper (2009) notes how that at the time of writing the dollar was somewhat of a safe haven, along with gold. Also, "increasingly it looks as though silver is also being treated as precious metal again rather than an industrial commodity, offering an interesting leverage play on the rising gold price" (Cooper, 2009).

It still seems that gold won't be going much higher as long as we have a strong dollar, Cooper says. Cooper also mentions the possibility of a global currency and the uncertainty of the dollar's future. However, in times of uncertainty, gold and silver will retain their value.

Finally, Cooper notes that holding gold is more a wise investment than holding dollars. He also notes the fact that the India is purchasing a lot of gold from the IMF.

Cooper, Peter (2009). What is the 'New Normal' for the Gold Price? Arabian Money. http://news.goldseek.com/PeterCooper/1257344245.php.

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