Market Plunge Works in Favor of This Precious Commodity

Gold baby, its all about the gold (NYSE:GLD). Gold has been outperforming as markets waver over weak indicators and yesterday’s massive sell-off. Gold reached prices of over $1,550 on Wednesday, the highest mark it has reached since May 3rd. When panic starts show on the stock market, investors seem to flock towards gold, so do higher prices of the precious metal reflect sound investing or predictable fear-induced hysteria?

Novel credit problems for the Eurozone are bubbling up daily due to Greek National Debt issues, and a weakening US dollar (NYSE:UDN) continue to mount concerns for currency investors in western markets. The dollar has recently fallen to its lowest levels in over a month against a basket of currencies, and things in the U.S. are only expected to worsen with projected higher food (NYSE:RJA) and fuel (NYSE:USO) costs leading to rising inflation and even weaker dollar value in the coming summer months. So does this portend higher gold prices in the near future?

According to one analyst at Barclay’s Capital, “Right now, the flows are perhaps being tempered a little bit by seasonal weakness, but it bodes well that at the start of May, when prices dipped below $1,500 that physical interest out of Asia did materialize, not as aggressively as we’d seen before, but that interest is still present and it’s still very healthy.” Another analyst added, “There is already some reflection that investors have returned to gold (NYSE:GLD) despite institutional investors having reduced their exposure.”

A look at month-long trends over May bodes well for gold, as prices for the metal rose by more than five percent over the month. Market-funds were also adding gold to ETF flows, as gold holdings rose for the first time since May 26, up about 70,000 ounces to 64.542 million ounces.

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