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Gold Price Posts New Record Highs Above $1,430

Release Date: 
Tuesday, December 7, 2010

GOLD PRICE NEWS – The gold price surged to yet another new all-time high Tuesday, rising to $1,431.25 per ounce.  The price of gold climbed alongside stock prices, which moved to a 52-week high as measured by the SandP 500 after President Obama agreed to extend the Bush tax cuts across the board.

New record highs for the gold price have come as the Reuters-Jefferies Commodity Index moved to its highest level since October of 2008.  Both gold and silver have risen in recent days on heavy volume on the COMEX.  Gold’s more volatile sister precious metal, silver, surpassed $30 for the first time since 1980 during yesterday’s trading session.  The new 30-year high in silver occurred in spite of a stronger U.S. Dollar.  The price of gold and silver have each displayed considerable strength in recent months as investors have accumulated the precious metals as their confidence in fiat currencies has waned amid the European sovereign debt crisis and the Federal Reserve's second round of quantitative easing (QE2).

JP Morgan, in its "Base and Precious Metals Daily" published by Michael Jansen, noted that “Silver is flying…around $30.50 at the moment and we stick to our view that there is acute spike risk in silver of a move towards $35-$40 basis. Broadly speaking silver is always at risk of being acutely tighter than gold because there is no massive pooled central bank resource that can be lent back into the market to stem the frothiness when it arrives.  Silver is thus not a sell until the momentum higher reverses.”

The rolling debt crisis in Europe has led to a situation where the gold price, as well as the silver price, has advanced at the same time as the U.S. dollar has appreciated versus America’s trading partners.  Standard Charter Plc, the top forecaster in recent years according to data from Bloomberg, predicted the euro/U.S. dollar exchange rate will fall below $1.20 by the middle of 2011.  Callum Henderson, global head of foreign-exchange research for Standard Chartered, stated that "We’re going to get a continuation of the problems that Ireland, Portugal, Spain and others are suffering.  The fundamental issue is these are countries that have relatively large debts, large budget deficits, large current-account deficits, they don’t have their own currency and they can’t cut interest rates.  The only way they can get out of this is to have significant recessions."

Kenneth Rogoff, Harvard University Professor and the former chief economist at the International Monetary Fund (IMF), predicted eventual debt restructurings for Portugal, Greece, and Ireland in a Bloomberg television interview.  European policymakers "can't just be in a state of denial," Rogoff stated.  "We were told everybody is fine, there is nothing to worry about.  Now their credibility is less than ever."

The new all-time high in the gold price is prima facie evidence of this lack of credibility.  Investors have flocked to gold on worries that the policy response to the fundamental issues plaguing the "PIIGS" merely pushes the problem to off to another day.  The long-term upward march in the price of gold is therefore unlikely to end until such time as government officials acknowledge that the problems of excessive debt levels cannot be solved by creating more debt.  While it no longer has a place, officially, in the international monetary order, gold has regained its role as a legitimate monetary alternative.

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This article is independently provided by and does not represent the views or opinions of Goldline International, Inc. Although the information in this article 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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†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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