Trading Gold Instead of the Dollar
January 30th, 2009 Posted in Analyst Picks, Oil and Precious Metals
As the global economy has been tanking, the price of Gold has steadily appreciated. Many businesses and regulators cry a foul when traders bet against the market and reap the rewards. Pessimistic traders have been doing this a long time. Those who have a negative outlook on the market can benefit of from the down ridden economy by taking a stake in the commodity that has traditionally been used as a hedge.
As the price of Gold has steadily risen the past three months, many who have previously shied away from Gold have changed their views on the outlook for Gold. As the economy worsens, both traders and your average consumer have been looking for a way to hedge themselves incase the U.S. economy falls into the ocean. This has created a bullish trend in the currency.
In late October, Gold began to climb from its low of $681 and now trades near the $922 mark. This is near a 5 month high for the commodity.
Gold rose higher yesterday for the first time in the past 3 trading sessions. The rally was sparked by more bad economic news coming from the U.S. economy. The announcement of the Federal Reserve taking more debt onto their balance sheet is problematic for the Dollar. It may require the Fed to print more money to cover the assets it is purchasing. This has the ability to significantly depreciate the Dollar.
Traders that want to hedge against the Dollar can take a position in Gold. The more unorthodox steps the Federal Reserve takes in fighting the U.S. recession, Gold may see a boost in value.
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Tags: dollar, Gold, hedge, trading gold
