Wednesday, January 16, 2008

Gold Going Down or Gold Correction?

Since hitting the all time high of 914 dollars an ounce gold has been dropping and is now in the 870 to 890 range. A big fat drop it would seem.

But the economy has not changed. Yes, the dollar has strengthened slightly (whatever does that mean? You can't tear it in half anymore?) and oil is lower. But that would not account for such an "interesting" drop. The demand for gold has not changed. The value of gold has not changed. Only the value in dollar terms. So what has changed?

The higher the value set on a commodity the bigger will seem the drop. Instead of saying, "Wow, gold dropped 20 dollars today!" Perhaps one should be looking at the percentage of the drop. "Oh gold only dropped 2 percent today." That give a better perspective.

The drop is slight. Part of the day to day ups and downs, the parry and thrust.

So what has changed?

Profit taking. That's what has changed. Many people bought into gold when it was in the 600 to 800 range. Now maybe because they emotionally believe it is too high, or maybe seeing a good profit to be made, some are selling out and raking in the profits. This is what has bought the price down.

"There has been a reversal of recent trends and the dollar has strengthened and oil and commodities have sold off from overbought conditions," said Mark O'Byrne, analyst at Gold and Silver Investments Ltd. "Corrections in most markets were expected as recent movements had been sharp."

Now that the profit takers are sitting home at the kitchen table counting their money, gold is likely to return to its busy trend. UPWARD.

There is still a long way to go for gold to reach its true value against the dollar That one thousand dollar gold price can be seen in the distance now.

And it is getting closer.

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