It is apparent from the chart that gold prices have fallen back to a support level. If this level holds as I expect it will, then gold will be testing its previous high of $986/oz. I have been very cautious about gold because of the swine flu risk raised the prospect of deflation, which could not be addressed by government pumping more money into the economy. With swine flu concerns declining, I think we are going to see continued recapitalisation of the financial sector, which will mean more paper money floating around or higher interest rates. It remains to be seen how Obama deals with US government finances. My expectation is that the government will seek to raise energy taxes. Higher interest rates are inevitable now.Andrew Sheldon www.sheldonthinks.com
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