Gold's demand is being negatively affected this year by lack of jewelry demand. One institute says jewelry demand was down over 25% in Q2 2008, and this might actually worsen. Since jewelry is still about 70% of gold demand, while investment (coins at your local dealer) is still less than 20% (industrial and dental use make up the difference), the risk to gold bugs from the consumer is far greater than the risk to the dollar, which is also accelerating vs. other commodities at quite a rapid pace. This year, Gold's only strength has been market fear, which seems at a current maximum right now, yet Gold still hasn't reached new highs. Not a good sign for gold, especially since coin dealers are currently out of stock. another risk is cheap stocks. Stocks are now a decent investment after a > 30% decline, and this makes the attractiveness of gold less. Lastly, short term t-bill rates have already flirted with zero percent rate several times in the recent months, which is bullish for gold since gold doesn't earn interest. But 90-day T-bill rate isn't going to go less than zero, so now gold bugs have exhausted this bullish sign and it can threaten to turn the other way if markets stabilize soon. Many people have said gold can get to $1,000 or greater in the panic, but no one is talking about $1,500 or $2,000 gold in the next few months outlook, so upside is limited. Timing might be wrong today, but price isn't.
$87.42 (10/09/08)
