Gold up on IMF sale to India

graeme at 6:10 a.m. Wed 04 Nov 2009

The sale of $6.7bn of gold by the IMF to the Reserve Bank of India pushed the price of gold to record highs yesterday. It indicates a willingness by central banks to switch from US dollars to gold.

This reflects the weakness of the dollar as much as it does the strength of gold, and it is unlikely to be sustainable beyond the recession. The last spike in the last bull run on gold (from the mid 70s to 1980) was followed by a rapid decline, and gold has not, historically, produced good returns, except over limited periods — buy and hold long term does not work well for commodities in general.

There may be more rises to come if the recession continues, but if the recovery is really on its way, then gold is probably close to its peak. The recession has also created good buying opportunities in other investments.

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