Thursday, January 21, 2010

Gold Plunges | Buying Opportunity?

Gold Prices Fall on Stronger Dollar

There is a huge demand for gold as a protection against inflation and misguided and endless printing of money, which continues to devalue the U.S. dollar, even when, as it did today, it has its occasional moments of temporary strengthening, which puts downward pressure on commodity prices for the short term.

That was the case yesterday as gold prices fell to their lowest levels in about a month, dropping by $27.40 or 2.4 percent to close the session at $1,113.60 an ounce.

News from China was given as the reason for most of the reason behind the U.S. dollar increasing in value for the day. Stock prices also fell as a consequence of the announcement from China.

Most of those who want to continue to buy gold should consider these temporary and short-term market corrections as buying opportunities, and this is a potentially good one, although gold prices could drop more depending on how much the media covers the China issue of cutting back on its lending to cool their economy, which has generated concerns of a domestic bubble.

Many of us hope that the news from China on cutting back lending continues, as it will drive the price of gold down to levels many investors have been waiting on the sidelines in hopes of. If it drops to around $1,000 an ounce, or maybe even to $1,050 and ounce, we could see big buying at that time.

Gold should continue to rise in price over the next decade or so based on the huge amount of money that has been poured into the market by the printing presses of nations around the world.

We could even have a short-term rebound in the U.S. dollar which will be touted as a major positive by the clueless, before it's hammered down again by market forces.

Either way, gold prices could begin to drop if the Chinese story continues, and that will be a great story and opportunity for gold investors looking for another great time to add to their gold holdings.

Gold prices and China Lending

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