Gold Investments

The gold prices recently touched an unprecedented level of $1,254. The trend of this price rise has however, been going for some time with the constant upward revision of support levels. The key question arising here is how stable is the trend? More generally, how safe is it to stay invested in gold?

Experts from the financial sector of the likes of George Soros are betting against quick recovery from the current delinquent state of the markets. They are of the view that it is still quite some time before it stabilizes. This is the major reason behind the flow of funds into gold in the form of bullion and other related products as gold ETFs.

A top Swiss asset manager reported that most of his rich clients were interested in wealth preservation during the crisis. This means that the bigger players will support any fall in the prices. In addition, people who wish to keep the prices in vigil would put in steps to check runaway prices for the precious metal. Summers being the holiday season for most of the financial planners and asset managers, the period is not likely to witness any increase, if not a fall. USAGold however, has reported that gold prices shot up at an average of 11.3 percent for the past 9 years. Also, the approximate growth from the fall i.e. June-July, to the end of the year has been 17.3 percent for the same period. Going by the trends, the gold prices can be expected to be a little less than $1,500 by December 2010.

Interestingly, there is a counter-view regarding the reliability of gold. Some foresee a fall in prices if a collapse similar to the one in 2008 returns to haunt the markets. The reason has been attributed to the possible requirement of liquidity covering in the event of cash-crunch. Still, the decline may not be as drastic as the other sectors.

Although the junior gold stocks and investments in other base metals were totally drowned during the 2008 collapse, these products have shown great resilience in 2009. According to an analysis by Lawrence Williams, if the market can be expected to stay anything better than going negative and gold to remain strong, the junior stocks are likely to provide the best of gains for the times to come. He insists that although the gold stocks have been reported to underperform during high times, they also proved a safer bet during the times of crisis.