Gold investors watch and wait

The increase in the price of gold, which exceeded $700 at the end of last week, has led to eager anticipation on the part of gold investors who are waiting to see what direction the metal price takes this week.

The most significant factor behind the increase is the weakness of the US dollar, the value of which fell again last Friday, an event that immediately caused the gold price to rise.

Gold actually broke through the $700 mark in Friday’s trading but fell back a little before the markets closed.

Some reports indicate that the price surge was more than a reaction to dollar weakness, being also motivated by the “safe haven” factor for investors nervous of the consequences of the US sub-prime mortgage crisis.

Over the weeks in which the crisis has unfolded, some funds needed to liquidate holdings and this resulted in a small and short lived decline in the price of gold.

However, ongoing concerns that the US economy is moving into recession and that the full effects of the sub-prime mortgage crisis have yet to be felt, will inevitably lead many investors to consider a holding in gold.

Silver may also rise in price, although it doesn’t have the same “safe haven” properties as gold, being more reliant on jewellery and industrial usage.

Historically, the price of silver does tend to move up alongside the gold price and then fall back more quickly. It is therefore viewed a slightly riskier investment.