With the U.S. dollar hitting a 10-year low and with a rocky equities market, you might expect gold to explode to the upside. Instead, gold has started tracking stocks and has put in a near-term low, observes Charles Nedoss, senior account manager at Peak Trading Group. “The Fed Funds rate used to be a great predictor,” he says, but with the new credit crunch, the U.S. Federal Reserve and other central banks are pumping money into the system to calm nervous investors. That could drive the U.S. dollar lower, reignite inflation fears and push gold up. “As much as we concentrate on our core rate, around the world costs are getting higher and commodities are going higher, too,” he says, adding, eventually gold will go with them. He expects gold to challenge $718 per ounce in September and picks a low of $655.
Fain Shaffer, president of Infinity Trading Corporation is bearish gold for the remainder of the year. “It can’t seem to break out past $700,” Shaffer says. He attributes that partly to hedge funds selling off gold and stocks in an effort to raise cash and deal with the subprime mortgage collapse. “I don’t know what to make of gold right now, but if the dollar tanks, below 80, there could be a flight to quality,” he says. Shaffer expects gold to trade between $670 and $700 in September.
