Tuesday, July 20, 2010

Superior Gold Group - Gold climbs as housing starts falter

The price of gold rose on Tuesday morning as housing construction plunged to its lowest level since October. Figures from the Department of Commerce showed that the seasonally adjusted annual rate of new building fell 5 percent in June, to 549,000.

The biggest drops, the report found, were in the construction of condominiums and apartments. Single-family homes, meanwhile, were down only .7 percent.

Along with weak revenues from IBM and Goldman Sachs, the news pushed equities markets downwards. Commodities like gold and silver gained, however, as traders searched for a haven. The price of gold rose .25 percent to $1,184.90 per troy ounce.

Fear of a double-dip recession, particularly in the housing market, is growing. An $8,000 tax credit for new buyers, which was extended through this April, helped keep realtors and builders afloat for a while, but now efforts to re-inflate the housing bubble seem to be leaking.

This increases the chance that the government will try to fight back by pumping more capital and liquidity into the economy. Even if there are short-term deflationary pressures, in the longer term, inflation will become a serious concern.

Investors should look at hedging their portfolios with holdings of dealer gold and silver, which will resist inflationary tendencies on the part of central banks.