Gold Advances As Hedge

Posted by Rob

March 31, 2008

Traders saw a rise in the value of gold, silver and precious metal stocks. The weakening US dollar led to traders investing in gold as a way to hedge against the currency downturn.

Gold made it’s third straight quarterly gain, making it a consistent hedging commodity during times of market volatility and the general economic downwards movement in the US.

Dollar vs Euro

In the global currency market, the USD continues to fall against the Euro. An EU report showed that consumer prices accelerated at the fastest pace in almost 16 years this month pushing the dollar down to within a cent of its all-time low against the Euro.

A Look at Gold (GDX) Chart

From the chart for Market Vectors Gold Miners (GDX) we can see the price is sitting within rising support and resistance lines. We can also see that the price is sitting above the 200-day sma. Although there is a retracement occurring, and the RSI is below the mid-point (50), we can expect rising GDX value as long as the USD continues to fall in the forex market.

With present market conditions looking set to continue - ECB holding interest rates and US reducing interest rates, we can expect gold stocks and precious metal commodities to continue to offer a safer hedging alternative for traders. For forex traders this means buying EURUSD.

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