Gold fever or gold rush?
Why the price of gold is hitting new highs, and where it might be going next
Gold prices are on the rise.
(Corbis/Matthais Kulka)
What happened
The price of gold hit a new high of $1,059.60 an ounce early Thursday, as investors turned to the precious metal as a hedge against a weakening dollar and the possibility of inflation down the road (CNNMoney.com).
What the commentators said
“Signs of gold fever are everywhere,” said Scott Cendrowski in Fortune. One “top-ranked” gold fund manager has offered the “astounding prediction” that gold will hit $5,000 an ounce. But if you look at fundamentals like supply and demand, it appears “gold is poised to fall.” Gold mining projects are starting to bear fruit, and “$1,000 gold brings out gold scrap sellers,” who unloaded 900 tons of gold jewelry and coins in the first half of 2009 alone.
That’s not going to stop gold’s rise, said David Goldman in Seeking Alpha. It’s not just inflation: “Gold is a hedge against the collapse of America’s central role in world affairs,” and if central banks get nervous about the dollar, they’ll snap up more gold than miners can produce. “What’s the price of the last ticket on the last train out of Paris on the night the Germans march in?” The sky’s the limit.
Or perhaps big exchange-traded funds have made gold “so incredibly easy to buy and to speculate with,” said Felix Salmon in Reuters, that individual investors have jumped in, in which case “goldbugs are no longer just hold-it-until-you-die inflation hawks and eschatologically inclined survivalists.” If that pans out, gold “isn’t safe”—it’s at the whims of heavily leveraged “speculators.”
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4 Comments
Posted by Alan Dreher, Thursday, October 8, 2009, 1:29 pm What country in the world is still on the gold standard? Isn't the legal value of gold in the US still 42.22 per ounce? How then could the US or other countries readopt the gold standard without causing massive deflation and the resulting depression? Consequently, I will not invest in gold as a hedge against inflation.
Posted by mjg, Thursday, October 8, 2009, 2:22 pm Agree with Dreher above. As the old wise man, Bernard Melzer, the first radio adviser in the 70's, used to say, gold will never stay up at some inflated rate permanently. It is like water and will find it's level back down were it started.
Posted by Dan, Friday, October 9, 2009, 5:24 pm It's really quite simple: those who hold dollars are being taxed as we print our way out of this mess. I'm thankful for those tremendously naive people and governments, because we couldn't get through this without them. Meanwhile, and a prudent father looking to preserve a decent future for my children, my top holding will continue to be the ageold store of value priced in your greenbacks: gold.
Posted by Claude B., Tuesday, November 3, 2009, 1:02 am This far from a Gold fever.I remember very well in 197980, that was a gold fever I would say more frenzy.
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