Most experts agree that as the U.S. dollar loses value, gold prices should increase. If this relationship holds true, then the last few months of 2013 should be a very exciting time for physical gold investors.
September’s payroll numbers were just released last week due to delays caused by the government shutdown and they came in well below expectations. According to CNBC, this reading boosted gold prices 2 percent to a three-week high of $1,344 per ounce, while the dollar index fell to an eight month low.
David Lennox, a resources analyst at equity research firm Fat Prophets, told CNBC, “The relationship between gold and the dollar never really went away, it just stretched its friendship.”
Lennox and other analysts are now feeling that the inverse relationship between gold and the dollar is strengthening once again. This is great news for physical gold owners now that the Federal Reserve has announced it will maintain its stimulus indefinitely. The ongoing stimulus, which involves pumping more and more money into the system through bond-buying, is decimating the value of the U.S. dollar.
As the value of the dollar continues to drop, a sharp increase in inflation should be just around the corner. Strategists like Jim Cramer have suggested that investor’s portfolios consist of at least 5 percent physical gold as a hedge against inflation. This strategy could push gold prices even higher in coming months. Lennox believes that gold could see a rally to $1,500 per ounce by year-end as the dollar continues to weaken.
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Lennox isn’t the only expert predicting an increase in the value of gold. Sean Hyman, editor of the Ultimate Wealth Report, told CNBC Asia’s Squawk Box, “We’ll see the dollar continue to drop. It’s broken a two year uptrend line – that’s very significant so I think the draw down in the dollar will continue to push gold up.”
Hyman sees the majority of the gold demand being for the actual yellow metal itself. He said, “Most of the people that have fled gold ETFs [Exchange Traded Funds], for the most part, have [already]. Physical demand is very strong.” He went on to say that physical gold demand in China and India as well as Singapore remained resilient as well.
CNBC also spoke with Scott Redler, chief strategic officer at T3live.com. He stated, “Someone is rotating back into gold, as it’s been in a downtrend all year. At this point gold has its best chance to outperform into the end to the year…You could have a little bit more in your portfolio because it could act better as the dollar weakens.”