The American Dollar is Stronger, but Gold Prices Slipped!

Just recently, it has been reported that gold prices have began to slip. But, the dollar is stronger and investors are taking profit. The American dollar made gains against the British pound and the euro. The Commerce Department reiterated its earlier estimate that gross domestic product grew 4.9 percent in the third quarter of this year. With that percentage, it has grown at its fastest pace in four years. Inflation is rising at the same time, and that could prevent the Federal Reserve from cutting interest rates much further in 2008 after the central bank rolled back rates three times this year. Interest rates underpin a nation's currency; if rates in the U.S. remain steady, that could lend support to the greenback. When a dollar is strengthened, it puts pressure on the prices of gold. Investors are now beginning to pull their money out of precious metals, even though precious metals are a safe zone when a country's currency is declining. ''It looks like the dollar is recovering even more so that may be attributable to gold's decline,'' Carlos Sanchez, CPM Group precious metals analyst. ''Profit-taking is also pushing gold prices down a couple of dollars.'' Gold for February delivery dropped $2.20 to settle at $803.20 an ounce on the New York Mercantile Exchange. Silver rose over eleven cents. The 13-nation euro bought $1.4323, down slightly from $1.4381 late Wednesday. The U.S. dollar was originally specified by the Coinage Act of 1792 to be a unit of weight (471.25 grains of troy silver (about 30.54 g of silver)) and not one of money as it is thought of today. The value of gold or silver contained in the dollar was then converted into relative value in the economy for the buying and selling of goods. This allowed the value of things to remain fairly constant over time, except for the influx and outflux of gold and silver in the nation's economy. According to an evaluation of data from the U.S. Department of Treasury, the cost of goods and services remained relatively consistent between 1635 and 1913, around a level of roughly 25 times the buying power of the U.S. dollar in 2006.



http://economics.about.com/od/exchangeratesbycountry/a/us_canadian.htm

http://www.nytimes.com/aponline/business/AP-Commodities-Review.html