|Gold Has Important Role In Investor Portfolio |
Los Angeles CA, (Tangible Investments) - by James O'Dell - Gold and Silver prices retreated sharply in early trading on Monday, as Gold dipped 1.52 percent to $1,129.30 an ounce, after easing $8.60 or 0.74 percent on Friday but still managed to end the week higher at $1,146.80 an ounce, after Fed chairwomanJanet Yellen said the U.S. central bank should start raising interest rates later this year. Silver slid 3.37 percent to $14.60 an ounce, after easing $0.05 or 0.33percent on Friday to close at $15.11 an ounce, while the Gold/Silver ratio inched down to 75.90.
The week began in the aftermath of the Fed's decision to leave U.S. interest rates unchanged following the September Federal Open Market Committee (FOMC) meeting which concluded on the previous Thursday. Edward Meir, commodities consultant at INTL FCStone, says that Gold could extend short termgains now that the Fed has decided, once again, to postpone a rate increase. Meir suggested that the Fed may have “boxed itself into a corner.”
The Fed's decision to leave rates unchanged appears to be based on global developments, particularly in China, rather than the U.S. economy. “What all this means for Gold is that we likely will continue to push higher over the short term, as we do not see the turbulence in the global equity markets being over justyet,” said Meir.
The director of investment research at the World Gold Council (WGC), Juan Carlos Artigas, suggested in an interview last week that investors should look beyond the short term volatility in Gold, as well as the Fed’s near-term monetary policy and focus instead on Gold’s attributes as an asset diversifier.“Regardless of what the Fed does in the next few months, Gold has an important role to play in an investor’s portfolio,” says Artigas. Investor concerns thatslowing growth in China and an eventual tightening of U.S. monetary policy has prompted an increase in safe-haven bids for Gold.
“With the pullback in equities, there’s definitely a flight to quality (assets) right now, it’s going into Treasurys and to Gold,” said Bob Haberkorn, of RJO Futures. The Gold price hit a four-week high on Thursday, and analysts at Capital Economics expect the precious metal to get even more support due topersistent physical demand out of Asia. “We expect total imports by China and India to pick up substantially in the remainder of the year as low prices and alack of attractive investment alternatives prompt additional buying,” said Capital Economics in a research note.
Meanwhile, Fed Chairwoman Janet Yellen said in prepared remarks at the University of Massachusetts last week that "The Federal Reserve remains on track to raise interest rates by year's end." She added that "If the FOMC were to delay the start of the policy normalization process for too long, we would likely end uphaving to tighten policy relatively abruptly to keep the economy from significantly overshooting its goals." The U.S. central bank has not raised interest rates innearly a decade.
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