Sunday, April 11, 2010

Gold Prices Rise with Dollar

Gold will get an interesting test this coming week, as the European Union committed about $40 billion in loans to Greece for a backup in case of emergency over the weekend, and the IMF reiterated they've made $10 billion in loans available as well.

They also noted that this was only for 2010, as over the next three years it could reach as high as $107 billion.

Now as far as all this affects the price of gold, we've been in relatively new territory lately in that gold has been decoupling from the U.S. dollar as people consider it a more trusted form of currency than the paper currency, and the Greece debt crisis has largely brought about that change.

It remains to be seen if investors continue on with this practice now that the EU has become more specific in its support, which seems to have an endless moving target in the recent past, implying a lot of disagreement behind the scenes.

Now that specific numbers have been thrown out there, it'll be a good test and learning experience to see if gold prices continue to hold up under the seemingly safer conditions presented to Greece.

It could cause temporary downward pressure on prices, but when you look at the so-called austerity program of Greece to deal with their extraordinary and outrageous excesses, it's very underwhelming indeed, and doesn't lend itself to being something that would necessarily allow all the European nations to keep supporting if there isn't real change in Greece.

If investors feel the same way, and most don't believe Greece will make real meaningful and long-term change, we could see gold shrug off the temporary fixes being offered the country and explode to new highs.

Obviously that's a big if, but we are in uncharted territory for the times we are living in, and there are no sureties as to how gold will respond to them.

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