GOLD - Currency of LAST RESORT

" To Diversify is the Key Element of a Successful Investment Portfolio " 

The fact that GOLD has always been the prime commodity to hedge against inflation, it has been known as the ' currency of Last Resort '. As time and history have proven, the resiliency in todays' Gold prices are stable as investors will always be fascinated with the yellowish metal for sometime as part and partial for their investment portfolio. Gold is heavily favored as a contrary commodity and financial instrument traded against the US Dollar traded in the worldwide exchanges. The trading volumes in the New York Mercantile Exchange ( NYMEX ) and the Chicago Board of Trade ( CBOT ) not including the exchanges in Hong Kong and London have far exceeded it daily transactions in this day of electronic trading compared to the past three (3) decades of the years. From the consolidation price levels of USD 260.00 / troy oz. to the mid-range price of USD 400.00 and to the high price levels of USD 1,032.00 in March of 2008 and the price of USD 1,005.82 in February, 2009. From thereon the prices have gone lower until today's prices have gone lower at USD 929.10 registered this 3rd week of August 2009.

However, it is not always the case that when Gold prices goes down the value of the US dollar goes up which is the normal theory. Currently, it is part of the fundamental reasons supporting the US Dollar at this levels of 78.66 basis pts. as of this writing. While Gold Spot prices are working at the USD 943.55 / troy oz. with a high record price for August at USD 971.00 levels.

Trading the precious metals in the spot and commodity futures market is an advantage to the investor as a diversification of the investment portfolio other than arbitrary hedging foreign exchange rates and major currency pairs as a means to protect the value of liquid financial assets against adverse price fluctuations in the international market. This is the essential reason of trading these markets as strategic investments rather than purely on a speculative form. Although, some investors do not take the physical assets when they trade this commodity, its use for spreading investment funds for diversification and a hedge for other risks inherent in the trading of the foreign exchange market. An example would be, buying Gold certificates during those times were at a premium, but are now considered to have been at the bargain price specially when it was at the price level of USD 260.00/ troy oz. in mid 80s.

As other investors see value in collecting this precious metals in the form of Gold coins like the American Eagle - Buffalo & Walking Liberty, the Canadian Maple leaf, the Krugerrand, the Chinese Panda - are just a sight and the 50 pesos Mexican Centenarios' 1.2057 troy oz. fetching around the US $1,440 are just mere examples. As these gold coins hold true meaningful value and are easily traded like any monetary instrument where prices move higher as time goes on. Below are just some examples of investing in the precious metal.

As some analyst may tend to agree that despite the wild price changes that Gold generates in a single days movement due to some political upheaval in Africa or whenever Russia starts selling or buying gold in the world market; prices tend to fluctuate in rapid action as traders would like to take advantage of the presence of a fundamentally driven market. this is how Gold influences the market when it leads in the financial news and investors switch cash capital investment as fast as the prices go.

As Gold prices are experiencing hedge liquidation when it was moving lower helping the US dollar although dampened with consumer confidence and retail sales; the US dollar has been moving lower and the price on Gold have been more tamed than the previous low price last two weeks.

As more cash capital flows in the market we would expect Gold to be part of the trading equation as the overall sentiments of the US dollar is weak. Until any real fresh incentives that will assist the US Dollar to move higher expect a steadier flow in the Gold market as it is known for being the ' Currency of Last Resort '.