5 REASONS TO STILL LIKE GOLD
January 11, 2011
5 Reasons to Still Like Gold
by Dave Kansas
SmartMoney
January 11, 2011
…1. Major central banks want inflation.
Along with central banks, the politicians also may want a little inflation. With massive debts and very high fiscal deficits in the U.S., Japan and many European countries, the temptation to "inflate away" those obligations will be very tough to resist. When policymakers really, really want something, they often get it.
2. Major currencies all want to be lower
This race to the bottom raises questions about the value of each fiat currency. And when the value or durability of currency is in question, people reach for gold. The recent currency contretemps is one reason that World Bank Chief Robert Zoellick said global leaders should at least discuss the possibility of gold playing a role in a revised world money system. Up until the early 1970s, the dollar was backed by gold.
3. Central banks are buying gold again.
Today, even with prices so much higher, central banks have rediscovered a taste for gold, primarily in the emerging markets. China and India (both the central bank and individuals) have bought plenty of gold and both are expected to be big buyers in 2011. Analysts believe that the accumulation of gold dovetails with both countries' view of themselves as emerging powers.
4. Euro-zone crisis is still not resolved
Most investors believe Greece will have to restructure its debt, and the stringent austerity programs may erode support for the euro in suffering countries such as Spain, Portugal and Ireland. Debate of a "two-speed" euro-zone, and the possibility of a smaller monetary union or bifurcated monetary union, underscore the messiness of the euro-zone problems. Expect flare-ups from euroland to boost gold one or two times this year.
5. We live in a precarious world.
As extreme as some goldbugs can be, the fact is that we do live in a precarious world. For a growing number of folks, holding a bit of gold is a piece of security, something that will hold its value. Homes used to do that. Gold's always done that.
Read full article here.
†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.
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