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Gold's Volatility Points to Higher Prices
By Patrick A. Heller
February 04, 2008


Gold prices are up - and more volatile. It is not unusual to see prices swing $30 or more within a couple hours, as happened Feb. 1 in early U.S. markets.

Regularly, we see more reasons supporting higher gold prices, with few negative indicators. In the past two weeks:

- The Federal Reserve dropped their benchmark interest rates twice by a total of 1.25 percent, hurting the U.S. dollar against other currencies and gold.

- Eskom, a South African state utility, cannot produce enough electricity. While some facilities were shut for summer maintenance, other plants broke down. Worse, heavy rains made coal at functioning plants unusable. The emergency is supposed to last two to four weeks, but will likely last longer. Several mines ceased production, reducing worldwide gold output more than 5 percent!

- On Jan. 31, the Gold Anti-Trust Action Committee (GATA) ran a full-page ad in The Wall Street Journal titled "Anybody Seen Our Gold?" The ad reinforces GATA's recent Freedom of Information Act requests for the Treasury Department and Federal Reserve to disclose the current status of reported U.S. gold reserves.

Until the public learns the magnitude of the "behind-the-scenes" efforts by governments and central banks to hold down gold prices, I expect the price of gold to become more volatile as it continues to rise.


Gold Price - Gold's Volatility Points to Higher Prices

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