'The New Global Currency is Gold

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Precious Metals Blog

Wednesday, January 09, 2008

'The New Global Currency is Gold

Remember when gold was money? The world is an uncertain place and Gold is back. Gold is and always has been a safe haven for investors. It is a store of value when everything else seems to be risky. Some say the real driving force behind this run is a rapidly depreciating dollar and the potential for negative real interest rates.

Prices have a long way to go before they approach the inflation adjusted record of 1980. Analysts agree it could top $1,000.00 and still be at the lower end of what would be considered a "safe haven range"

Gold will continue to benefit from the World demand and increases coming from the industrialization of both China and India. China contains 1/5 of the world population, they are building out an infrastructure, buying cars, computers and building highways. It is like a locust infestation on all raw commodities.

However, it is the relationship between the dollar and the reaction of the world's central banks in regards to the credit squeeze that could propel gold to accelerate its gains.

We have all but abandoned our concerns about inflation as the Federal Reserve has become aggressive in rate cuts in response to the credit crunch. This will accelerate the decline of the dollar and make gold even more attractive.

The entire world's major economies hare experiencing rapid money supply growth of over 10 cents a year recently. The U.S. Fed is the world's largest holder of gold, but the supplies are growing at only 1.5% a annually. If gold is a finite currency, its value isn't just the dollar, but sterling and euros too, should continue to rise.

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