Newspaper article THE JOURNAL RECORD

Troubling Factors Slam Gold Prices

Newspaper article THE JOURNAL RECORD

Troubling Factors Slam Gold Prices

Article excerpt

bond markets lately? You won't get much sympathy from fans of another staple investment, gold.

The price of gold, which was hovering in the range of $450 to $460 per troy ounce heading into the summer, made news recently when it slipped below $400 for the first time in more than a year and a half.

The timing of this weak showing made it especially hard for gold's admirers to swallow.

- First of all, it came against a background of widespread inflation worries, which were given voice by no less an authority than Alan Greenspan, chairman of the Federal Reserve Board. Gold is supposed to thrive on inflation fears.

- Secondly, gold has not benefited from all the shakeup investor confidence has suffered through in the nearly 12 months since the stock market crash last October. Gold is supposed to serve as a haven from shocks in other investment markets.

``A combination of forces has recently ganged up on the price of gold,'' observed Charles Eaton, an analyst at Nikko Securities International Inc., in a recent report on the subject.

Among them, he cites rising interest rates around the world; an upswing for the dollar in foreign exchange; falling oil prices; and softness in prices of some other commodities, which suggest that inflationary pressures are not intensifying the way many people thought they would.

``Gold is international money as defined by the free markets,'' Eaton said. ``When gold is strong, the dollar is weak, and when gold is weak, the dollar is usually strong.''

At the same time, high ``real'' interest rates - that is, nominal interest rates compared to the rate of inflation - have been a drag on the gold market. …

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