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davepamn

M$1.00 Funded By Mahalo ? | May 06, 2009 02:40 PM

If the economy is recovering then why is gold still over 900 dollars an ounce?

Junk bonds are selling indicating companies will be able to gain debt funding, yet, gold remains expensive. Does the high gold cost indicate the economy is not recovering?

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yagelski

May 06, 2009 05:40 PM

My point of view (i.e. no references to cite) is that investors continue to buy gold because they are not yet convinced that the economy is in fact recovering.

http://mindmillion.com/MONEY/images/01-goldbar-collection.jpg
Your statement that junk bonds are selling is not the lone indicator of a recovery. The investment community considers many other factors. The reality is that many companies (manufacturing and retail) are just beginning to feel the crunch of the slowing economy and are only now starting to lay-off workers. With the automobile industry (as we know it today) on the edge of collapse, many investors are patiently waiting for the other shoe to drop. In the meantime, gold remains a good investment for them, helping to sustain the premium price.

Asker's Rating:

• 1. Retail rental space is extremely depressed.
2. Brokers are fleeing Wall Street.
3. REITs are buying down debt at 50 percent discount
4. Unemployment is high
5. Commodities and inflation are one to one correlation

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dcanswerer

May 06, 2009 02:43 PM

I think an economy can recover and still have gold be valuable (for a while).

Even when the economy rebounds (which, according to the previous quarter's GDP numbers, it hasn't yet) people will still be skittish about investing. They will even be skittish about putting money into banks. Although I haven't heard stories about people losing their money in bank closures, that fear still exists. So people are willing to put money into extremely safe vehicles, such as (essentially) zero interest treasury bonds or gold.

I can't see this $900 value lasting very long after an economic rebound. When the Dow starts going up steadily, and when banks look more secure, I think people will start investing and putting their money back into banks.

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