How we arrived at $1,000 gold
  CEO Craig R. Smith explains why gold has become a new asset class

3-14-08 -- Gold prices topped $1,000 an ounce today in anticipation of next week's Federal Reserve decision to slash interest rates, further lowering the U.S. dollar's value. Millions of Americans are wondering why gold prices have tripled since 2001. Craig R. Smith offers his insight, based on 35 years of experience:

Gold is telling the world inflation is back. In recent years investors have relied on real estate to serve as their primary inflation hedge, but now that housing is in decline, they're turning instead to precious metals.

The dollar's freefall continued today with the greenback hitting another record low against the euro and falling below parity against the Swiss Franc for the first time in history.

Meanwhile J.P. Morgan and New York Fed together bailed out Bear Stearns from a sharp liquidity crunch today. "Our liquidity position in the last 24 hours had significantly deteriorated," said Bear Sterns CEO Alan Schwartz.

Yesterday The Carlyle Group, which recently defaulted on $16 billion of bad mortgage debt, was on the verge of collapse after failing to find new financing. Financial news like this further shatters investor confidence and sends investors running into safe havens like oil and gold.

The U.S. government’s official ‘strong dollar’ policy has failed. When the dollar traded at $1.18 euro in 2006, I said to expect $1.50 euro. The euro is headed toward $1.70 and oil is headed to $125 a barrel.

The Fed now faces a 'mission impossible' task of navigating the U.S. economy between a recession and rising inflation. Expect tough inflation talk, but a flood of paper money in 2008. We also have trillions in bad mortgage debt and a ticking derivatives ‘time bomb’.

In 2007 a series of Federal Reserve interest rate cuts battered the buck, which lost nearly 10 percent against the euro. Lower interest rates weaken currencies and push investors to shift resources into hard assets like gold. In 2008 it looks like more of the same.

When the dollar traded at $1.18 euro in 2006, I said to expect $1.50 euro. I think the euro is now headed toward $1.70 and oil is headed toward $125 a barrel, due to a falling dollar.

The Rule of Gold

In the 80’s and 90’s cash was king. But in the 21st century gold became an alternative to the soft dollar, lower returns and higher market volatility. A major economic paradigm shift occurred in 2001 and has gained momentum every year since. The era of paper currencies and complicated structured investments is giving way to a new era of tangible assets.

No wonder gold is emerging as a preferred asset class in a world drowning in debt. Gold serves the public as a true barometer of dollar's value worldwide.

The era of paper currencies and complicated structured investments is giving way to a new era of tangible assets. Gold is emerging as a preferred asset class in a world drowning in debt. Gold serves the public as a true barometer of the dollar's value worldwide.

In reality, gold’s value hasn’t gone up, it’s the dollar's value that's gone down, thus driving gold prices up. For example, between 1792 and 1933 either a $20 gold piece or a $20 bill would buy a fine suit of clothing. A $20 gold piece will still buy a fine $1,000 suit, but today’s $20 bill will not even buy a nice tie.

Long-term dollar weakness also puts U.S. security at risk. Trillions of dollars are now held by China and Mideast funds. CBS reports Israel and Iran are on the verge of war. Gold is the ultimate trump card against geopolitical wild cards.

President Bush sees no recession, while Fed Chairman Bernanke sees no stagflation, but precious metal prices clearly reflect higher inflation ahead.

“Gold, silver and platinum may be the best-performing financial assets this year as inflation and slowing growth erode the value of the world's major currencies, bonds and stocks,” reports Bloomberg.

A weak dollar is just one of a seven major reasons why gold is rising. Other key drivers include; supply-demand fundamentals, China/India growth, a long-term commodity cycle, geopolitical uncertainty, and ETFs -- all discussed in the GOLD 101 educational DVD. Click FREE Information above for this DVD.