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Gold and Silver Performance in 2010

Much like other periods in gold and silver investing, the performance of these metals in 2010 has had an interesting relationship with the US dollar. Both gold and silver have traditionally reacted inversely with the dollar, meaning that when the dollar rises, gold and silver prices typically fall; conversely when gold and silver rise, the dollar generally loses value.

The first month of 2010 has stayed true to this pattern. For January, gold prices have dropped approximately 4%, while silver prices first rose nearly 15%, and then dropped almost 20%. These numbers stand in contrast with the US dollar, which was up about 2.5% for the month.

The relationship between gold and silver and the dollar is less about a direct connection and more about the factors that drive each. The dollar is typically an investment for positive times; as the economy is humming and things are booming, the dollar usually rises in value. This rise means that it takes fewer dollars to purchase gold or silver, typically resulting in a drop in their prices.

Conversely, tough times and poor economic conditions weaken the dollar, making its buying power fall. As consumer confidence drops in the dollar and the economy, the prices of gold and silver usually increase as demand increases.

This trend is still promising for investors today. Although the dollar has experienced some short term gains, the outlook is not good; the economy is not aggressively responding to stimulus by the government and the bailouts have flooded billions of additional dollars into the monetary system, weakening the dollar.

Investors in gold and silver should perform their due diligence and then consider adding bullion or certified coins to their current investments. The factors that make these commodities perform well are in place and could spur both to higher prices in the days ahead.

Shannon King

Senior Staff Writer – GoldSilver.org

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