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Gold And Silver Drop With Demand

February 23, 2010Gold and silver prices fell by their largest amounts in over two weeks as speculation over lower demand in the face of a rising dollar prevailed. Dropping nearly $9.00 per ounce in morning trading, gold temporarily tumbled back to the $1,100 mark while silver dipped below the $16.00 level in the face of renewed gains by the US dollar, which rose to almost 81.00 on the US Dollar Index before slipping back on stronger afternoon trading by precious metals.

"The negative argument rests with poor investment flows and fundamentals," said Tom Pawlicki, an analyst at MF Global Holdings Ltd. in Chicago. "Investor appetite for gold as shown through ETFs has been lacking and doesn’t argue for new price highs."

While weaker gold and silver numbers are evident, there is still a favorable trend towards holding both metals. Investors should hold the metal in foreign currencies as a hedge against "the bearish dollar supposition that is attendant to a simple bullish view of gold," said Dennis Gartman, an economist in Suffolk, Virginia. Buying metals in foreign currencies allows investors to get increased value when buying, and then sell as the dollar drops and metal prices rise in the United States.

While the strength of the US dollar has caused concerns about demand, gold and silver continue to be strong international investments. Both metals have shown the ability to rise in price as the dollar has an unstable future, meaning that US-based investments will likely be profit makers during the year. Investors should look to increase their holdings before prices rise, reducing potential earnings. 

Shannon King

Senior Staff Writer – GoldSilver.org

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