Gold Investors on the Move Again
The dollar is at a record low against the euro, while crude oil is at about $112 a barrel. A decline in U.S. crude oil stock piles has raised concerns over supply, resulting in a flurry of buying activity and higher prices. That see-saw I mentioned yesterday is definitely in favor of gold investment this morning!
Todays caviat however, are the announcements from the Bank of England and the European Central Bank on interest rates. While the ECB held rates steady, the BoE lowered their key rate by a quarter point down to 5%, the lowest it's been since fall of 2006. These decisions will effect currency rates, which will in turn have an effect on precoius metals investment. Of course, the main intent of the BoE move is to stimulate economic growth, while the ECB hold indicates their desire to stem the rising inflation threatening member countries.
Additionally I am starting to notice more little talk on the Internet about an overplaying of the commodities market by investors. There is reasonably based concern that speculation has pushed prices beyond the ability of an actual usage market to support, particularly in the case of precious metals. We have already observed some larger swings in gold bullion values over the past three months and this is the sign of an overplayed market. I don't mean to imply that there is a big crash coming for precious metals, not while the dollar continues to decline, just that you may see some frightening hills and valleys over the next six to eight months.