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Gold Price Rises to $1,377 as U.S. Dollar Sinks

Release Date: 
Wednesday, January 19, 2011

GOLD PRICE NEWS – The gold price climbed $8.60 to $1,377 per ounce Wednesday, boosted by continued weakness in the U.S. dollar. If today’s gains in the gold price hold, it will have risen for three consecutive days. The U.S. Dollar Index (DXY) dropped 0.65 to 78.34, its lowest level in eight weeks. Dollar weakness has helped stem the correction in the gold price and in the shares of gold mining companies.

Following two weeks of losses that saw the gold price drop $58.95, or 4.2%, the price of gold has rebounded amid widespread gains in precious metals. Silver has rallied alongside the price of gold, posting a 1.9% advance yesterday and rising another 1.7% this morning to $29.42 per ounce. Platinum surged over 1% ahead of today’s open on Wall Street to $1,848 per ounce – a 30-month high.

Although precious metals and the bulk of the commodity sector have posted strong gains in recent years, gold has advanced in large part due to its unique role in the global financial system. Anthony Bolton, a legendary U.K. investor who manages the Fidelity China Special Situations investment trust, discussed the implications of gold’s key differences in an interview with The Telegraph.

“Gold is the only commodity to buy,” at the present time, because it is “more like a currency than a commodity. Only a small fraction of gold mined is used – for jewellery and the like. The way it is held as an asset in central banks is not a feature common to other commodities,” Bolton stated. “Almost every country has a big budget deficit at the moment so it is in their favor to see their currency depreciate. Countries hold gold as a protection against that.”

Commodities are denominated in U.S. dollars, and with the greenback declining over the past two years, Bolton noted that their gains have looked particularly attractive. However, “if commodities were measured in a stronger currency, the recent rallies might have been different.” He contended that the “best time for commodities was in 2006, when the whole world was growing above trend…Western economies are anemic at the moment, and I am not sure emerging market growth is enough to keep commodities going.”

At the present time, Bolton has a position in gold, but not in any other commodity. His fund holds approximately £732 million, or $1.17 billion, pending an ongoing issuance of additional shares of the investment trust. Bolton did not provide a specific gold price target in the interview, however. Bolton’s comments echo those of several other prominent investors, including George Soros and Jim Rogers, who have highlighted gold’s distinct role as the one form of currency that cannot be created out of thin air by central banks. Each of these fund managers has increased his exposure to the price of gold in recent years and has continued to reiterate a bullish outlook on the gold price in the years to come.

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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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