The instability of the American economy has made many investors nervous, and there's been a lot of speculation about buying gold as a safe alternative to a market that continues to tank. These days, there are many reasons for that nervous feeling.Devaluation of The Dollar. With taxes cut, and government spending for high ticket items, such as the war in Iraq, continuing to rise, new money gets printed as fast as the presses can roll it out. The US dollar continues to lose its value compared to the Euro, the Yen and the Canadian dollar, as evidenced by the growing number of international tourists coming to the States, taking advantage of the comparatively cheap prices.
Fear of Bank Failures. The Federal Deposit Insurance Corporation (FDIC) is expecting many bank failures in the next few years, due to the imploding housing bubble throughout the country, where too many loans were made, using shaky interest rate mechanisms. The resulting credit crunch will make it harder for people to take out loans, eliminating the biggest moneymaker for these banks.
Technical View : In the above Gold Chart Cmp 904.75 $ you can see the Gold is making 'Higher Tops & Higher Bottoms' on Day chart. This indicates strength in the stock. Even though Gold looks weak, it would be advicable to wait till Gold breaks immediate major resistance of 931.45 $. It appears that the Gold will test the high of 931.45 $ in couple of days. On 12th Dec 2008 I had posted the weekly chart, which shows that Gold was still in downtrend.