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.
