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Why Gold Prices Are Up Today

Gold is down about 17% in 2013, but here's why gold prices are up today - and will continue their rise...

On Monday, as gold inched toward $1,400 an ounce, bulls claimed the yellow metal was entering a third-quarter bull market – and Tuesday's gold-price gains helped it get there.

Comex gold surged $24.40 to $1,417.50 an ounce in mid-morning trading Tuesday, and spot gold soared $13.50 to $1,419, a three-month high.

The precious metal is now up some $200 an ounce, or 20%, from June's three-year low of $1,179.40. A 20% gain equals a bull market.

Propelling gold prices Tuesday was a move from "risk-off" trades into safe haven assets.

All three major U.S. benchmarks were off sharply Tuesday, piggybacking the swoon that began late Monday, as investors grow increasingly concerned the United States and its allies are organizing military action against Syria.

Editor's Note: To get the full picture of where gold prices are headed next, you have to see this chart out of China. It's the most important gold graph we've seen in a long time…

"Coming within the current nervous state of the markets, any flare-up or intensification of Middle Eastern tensions will surely take a further toll on risk sentiment," Marc Chandler, global head of currency strategy at Brown Brothers Harriman, told Reuters.

U.S. Secretary of State John Kerry commented Monday that evidence "strongly indicates" chemical weapons were used in Syria. Kerry said U.S. President Barack Obama "believes there must be accountability for those who would use the world's most heinous weapons (chemical gas) against the world's most vulnerable people."

Those comments were construed as a war speech, and military retaliation against the Syrian government could occur as early as Thursday.

"The opposition was told in clear terms that action to deter further use of chemical weapons by the Assad regime could come as early as in the next few days, and that they could still prepare for peace talks at Geneva," a source who was at Monday's meeting between envoys and the Syrian National Coalition in Istanbul told Reuters.

Weak Data Could Delay Taper

It's not just the headline news factoring in to why gold is up today…

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  1. Dan R Funk | August 29, 2013

    Wife and I are both laid off and both had to retire to make ends meet, have small retirement but making only 0.01% on the account. Like to make small investment in gold bars, good idea?

    • MCCORMICK45309 | August 29, 2013

      Dear Dan,
      Gold is a non-income producig asset with no interest and no dividend payments. Some of the gold stocks offer dividends in the area of 2-4% but are always dependent on circumstances and have no certainty attached to their payment. Gold also tends to decline in an environment of rising interest rates and if you believe as I do that rates will be heading higher over the next two years then holding physical gold becomes more expensive in terms of "opportunity cost". meaning you miss out on interest and dividends. There are a few ETF, ETN funds that offer small dividend distributions but if your income needs are such that you need these for day to day living expenses then I would discourage the purchase of gold bars. There are alternative investments that hold the physical metals from Sprott, a Canadian company which runs the SPPP, PSLV (platinum and palladium; and silver) which hold the physical metal on your behalf. I have always found that reliance on the one metal, in your case, gold, is too risky as any metal holding should likewise be balanced with silver, platinum, palladium and perhaps a little uranium. Platinum trades historically at a 50% premium to gold and movements in gold are generally exceeded by the comparable moves in silver. Gold does not have the heavy support of industrial demand that serves as a floor under the other metals. I think the purchase of gold bars with the associated mark-up makes them less attractive than the purchase of a basket of the metals in alternative funds which can additionally offer some yield and some diversification. The fact you are retired and have not mentioned the status of your insurance for health care needs may dictate that you acquire health insurance which must be a top priority for you both. Paying off expensive credit card debt which is non-deductible may be the best investment you could make at this time. You also know the old axiom that you should have 6 months of living expenses put away as an emergency fund and not have it tied up in gold bars as you have suggested. I personally wish you the best but I would look to alternatives, with a yield, better diversification, an ability to profit from rising rates and favorably taxed dividends and the need for a readily available emergency fund and proper health insurance or supplemental medicare coverage if you qualify.

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