NEW YORK (
) -- As gold rises to its highest levels since March of 2008, many think it will remain at elevated prices, and for good reason.
Traditionally, investors turn to gold to hedge against inflation and when inflationary fears are high, the price of gold rises. However, this doesn't seem to be the case with the most recent surge in gold prices. Investors are still buying government debt, as indicated by the yields of 10-year Treasury notes. Also, other factors have fueled the hard asset's uptrend.
The main reason gold has surged is due to the weakness of the U.S. dollar against other currencies. Last week, the U.S. Dollar Index fell to the lowest level in a year. This has encouraged investors to borrow greenbacks at record low interest rates and buy assets in countries offering yields as much as 8.1 percentage points higher than U.S. deposit rates.
Additionally, gold is traded in the world markets using a dollar-denominated currency, so as the dollar remains weak, gold will remain attractive to foreign investors, who will continue to gobble it up.
The fundamentals of the dollar continue to remain weak. From an economic perspective, the overall U.S. economy is driven by consumer spending, which will remain problematic until unemployment starts declining.
Although the most recent data suggest that retail sales were up and consumers are spending, some believe that the numbers can't really do anything but go up and the trend can not be sustained until the labor markets strengthen. For these reasons, in the near future, it appears the weakened dollar will cause gold to remain at elevated levels.
Some good ways to invest in gold include the following:
SPDR Gold Trust
, which is up 23% from a January low of $79.79. It closed at $97.96 on Monday.
iShares COMEX Gold Trust
, closed at $98.06 on Monday. It is 23% above its January low of $79.86.
Keep in mind that there are inherent risks when investing in these equities and a good way to mitigate these risks is through the implementation of an exit strategy.
According to the latest data from www.SmartStops.net, an upward trend in the previously mentioned ETFs could come to an end at the following price levels: GLD at $94.87 and IAU at $95.17. These price levels fluctuate with market volatility and change on a daily basis, updated data can be accessed at www.SmartStops.net
-- Written By Kevin Grewal In Laguna Niguel, Calif.
At the time of publication, Grewal had no positions in the stocks mentioned. Kevin Grewal is an editorial director and analyst at SmartStops.net where he focuses on mitigating risks and implementing exit strategies to preserve equity. Prior to this, he was an analyst at a small hedge fund where he constructed portfolios dealing with stock lending, exchange-traded funds and alternative investments. He is an expert at dealing with ETFs and holds a bachelor's degree from the University of California along with a MBA from the California State University, Fullerton.