Perhaps dollar strength is a misleading term. There’s nothing in the US economic position to suggest that any serious rally in the dollar’s strength against other currencies is likely in the short term. Indeed one would expect it to remain weak and decline further. This might affect the Gold IRA investments made by the 401k rollover companies. Click here if your want to know the best companies?
Value of the dollar and your gold IRA rollover account
As we have noted continuously over the past months, the value of the dollar and the price of gold have been going hand in hand with an inverse relationship, so its hardly surprising that the gold price fell back into the high $720s after reaching the heady height of $747 – a 28 year high – at one time Monday as a brief period of strength was seen in the dollar relationship to other major world currencies. Read the full review of Regal Assets LLC.
Pattern of gold price movements – dollar fall – gold rises?
If one looks at the pattern of gold price movement in recent months the dollar correlation has been extremely evident. As the dollar falls, gold rises, but virtually every time this happens and there is a, usually short-lived, correction back upwards in the dollar value, the gold price falls immediately – only to resume its upward path as further dollar declines take place.
What was perhaps surprising about Monday, though, is that the gold price rose initially when the latest better dollar value figures were published, which could have been seen as an extremely bullish sign for the yellow metal. But overnight US time, as Australian and Asian markets came on line, the dollar stronger/gold weaker sentiment took over and the price slipped back accordingly.
There will have been a strong element of profit taking too in the price setback, which can be expected for traders playing the margins. Computer generated sales may also have come into play. But this has very much been the pattern of the gold price increase since early in the year. Fastish rises, followed by a fall back and then a period of consolidation until the next sharp rise.
But, dollar devaluation is approaching a key level. How long can Central Banks allow their own currencies to rise against the dollar as their countries’ own goods become uncompetitive against US ones on world markets? There shouldn’t be a problem with your rollover if you follow this rollover guide. Maybe the devaluation of the dollar against world currencies is approaching an end – at which point depreciation of the dollar against gold becomes the only true valuer of the greenback. This suggests the devaluation pattern may change as gold really re-assumes its safe haven status.
And gold is becoming more and more expensive to mine. The NBF report noted by my colleague Dorothy Kosich today suggested that it may soon take a true gold price of $600 to make a new gold mine pay in terms of exploration, operating, capital and sustaining costs. If this is indeed the case, then this does put an effective gold price bottom in place as new mines are required to replace declining production from old ones, and with supply and demand pretty well in balance, a serious shortfall in production could also increase gold price strength.
A number of observers feel also that we could be close to a stock market crash. If this should happen then gold may well come into its own. But, as has been seen in the recent subprime mortgage credit crunch, a crash may initially be accompanied by a fall in gold price as holders liquidate their gold positions to preserve liquidity. This fall, though, would probably be shortlived – again as seen recently with a metal price surge following quickly behind.
But this is speculation. For the moment I’d expect gold to bounce along at current levels before resuming its upwards path and there seems little to stop it hitting the $760s or higher by the end of the year, and continue upwards in progressive steps from there on.
But, as we are always warned in the UK on purchasing financial instruments, prices can fall as well as rise. Nothing is certain in this world, but gold does look like remaining a good bet for the time being.