Gold Loses and then Gains

Posted by Admin - April 19, 2010

Gold has made significant gains over the last two or three years on the back of widespread fear of recession, and then the recession itself. Gold acts as a protective investment against recessions because it keeps its worth, unlike stocks in certain companies or dollars. However, Gold lost some over the last 2 weeks before gaining again today because of concerns about the SEC’s investigation of Goldman Sachs.

Gold initially extended Friday’s slide overnight, with the June futures hitting a 1 1/2-week low of $1,124.30 an ounce, on “leftover sell orders and some fresh bailing-out instructions” left with trading desks, said Jon Nadler, senior metals analyst at Kitco Metals. The main catalyst continued to be Friday’s news that the Securities and Exchange Commission charged Goldman Sachs with defrauding investors by misstating and omitting key facts about a financial product tied to subprime mortgages.

This prompted a general shift out of so-called riskier assets ranging from equities to commodities such as gold, oil and base metals. But as the day wore on, some of these fears began to fade, said one New York trader, although not due to any specific breaking news.

It looks as if gold is not going to go on a downhill slide, as many investors claimed over the last week. When the price dipped, jewelry manufacturers in India began buying up the metal in order to take advantage of the bargain–this is apparently what caused the minor surge in price today.