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business newsFour Ways to Go for Gold
By
Chuck LeBeau Jun 30, 2009 10:20 am
As long as the dollar continues to lose value, yellow metal will remain attractive.
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The weakening of the US dollar and fears of inflation are 2 major reasons why. Traditionally, the dollar and gold move inversely -- as the dollar strengthens, gold prices decline and vice versa. Also, as most investors know, gold's one of the best ways to hedge against inflation. As long as the US continues to print money to fund record deficits, inflationary fears will remain -- and gold will be a hot ticket.
To add to the attractiveness of the precious metal, China -- the world’s sixth largest sovereign gold holder-- is expected to buy more bullion, using even more of its $1.95 trillion in foreign exchange reserves to fund the transactions. As of right now, China’s gold holdings are roughly 1.8% of its foreign-exchange reserves -- much lower than those of other dominant nations like the US at 78.3%, and Germany at 69.5%. Some analysts even believe that China will sell some of its US Treasuries to fund the purchase of gold to drive the price of the commodity higher still. By selling Treasuries, the US dollar will grow weaker, raising the price of gold.
As long as the dollar continues to lose value, gold will remain attractive. Here are some possible ways to access the glimmering commodity:
1. SPDR Gold Shares (GLD): up 16% from a January low of $79.79 to a June 26 close of $92.29.
2. Market Vectors Gold Miners ETF (GDX): up 39% from a January low of $28.20 to a June 26 close of $39.20.
3. Barrick Gold Corporation (ABX): up nearly 35% from a March low of $26.04 to a June 26 close of $35.03.
4. AngloGold Ashanti (AU): up 56% from a January low of $24.17 to a June 26 close of $37.60.
Remember that investing, whether it be in commodities or equities, has its ups and downs and involves some risks. To moderate these risks, it's vital to use an exit strategy. According to the latest data from www.SmartStops.net, here are the price levels where the uptrend of the previously mentioned ETFs and stocks would be over: GLD at $90.55; GDX at $36.06; ABX at $32.08; AU at $33.59.
No positions in stocks mentioned.
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