The Advancing Gold Futures

The significance of gold as a measuring standard of wealth and a viable investment option has been recognized since ancient times. Even after the dissolution of the Gold Standard worldwide, the yellow metal remains the most important asset for the various Central Banks across the globe. In such times, the demand surges in every quarter from national treasuries to retail investors. The recent global recession reestablished the authority of gold coins for hedging, investment, and even for speculative purposes.

The gold futures got a fresh impetus on June 15, 2010, amidst the growing concerns about the state of global economy. The August-delivery gold futures increased by 0.8% to reach $1,234.40 on the New York Mercantile Exchange, after hovering around $1,220 for a couple of days. Amidst concerns over the rising sovereign debt levels and weakening US Dollar, gold is increasingly seen as an effective alternative. The Dollar Index (DXY) was down by 0.7% to 85.93, while Euro ended approximately 1% higher than the Dollar. The Dollar Index measures the price of the US Dollar, relative to six major currencies of the world. The Greece-led economic crisis that came into picture in the first quarter of 2010 sent warning signals in the already ailing world economy. The impact of these events in the Euro Zone could not be assessed completely until date. As more and more grim news and analysis began pouring in, the fears of a double dip grew stronger.

The volatile situation in the European Union, in general, and the downgrading of Greece’s credit rating by Moody’s Investor Service on Tuesday, are the other major factors currently driving the gold prices. The credit rating agency slashed the ratings to non-investment grade, pointing out the inherent risks of IMF-sponsored proposed bailout packages for Greece. The Chicago-based Future Path Trading’s futures analyst, Frank Lesh stated that it is still uncertain whether the European Union is out of ‘danger’ and on the path of recovery. Nevertheless, the popular sentiments remain highly skewed in favor of gold. According to analyst Stephen Platt from Archer Financial Services in Chicago, following the past week’s price fluctuations, the commodity appears to be consolidating. Ever since the debt crisis became apparent, the commodity has become pricier by 12%. For the first time in almost four decades, since the gold futures were introduced on the New York Mercantile Exchange, the bullion touched $1,245.60.