Gold is a safe haven and has been considered as such for thousands of years.  Therefore it makes sense that we have seen gains in the price of gold upon economic concerns.  Recently we have seen talk in the news about a “double dip” recession which has investors very concerned.  In conjunction with recent bad economic data coming from Japan, the housing market and the manufacturing sector it in no wonder gold is up over 5% over the last three weeks.

Gold is first and foremost a financial insurance and over the long-term it keeps up with inflation.  In the last ten years however we have seen gold outpace inflation and most asset classes, including the stocks, bonds and real estate.  So while investors are seeking gold for safety reasons, lately it is also being used for growth.  For the last ten years gold has provided its owners with a win-win situation, being both good for safety and growth.  Traditionally instruments used for safety are low risk, low yield vehicles.  Gold has averaged a 17.1% gain per year for the last nine years, a nice return for a safety vehicle.

Gold has a seasonal trend pattern as discussed in an earlier blog post.  Gold typically picks up from here.  In eight out of the last nine years we have seen gold rise an average of 13% from August through December.

Look for gold to continue its trend as the government will continue to put pressure on the dollar through quantitative easing (money printing).