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Gold Surges to $1100
Topic Started: 6 Nov 2009, 05:00 PM (158 Views)
Ryan
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Intellectual
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It's gone up $40 in the last 2 1/2 days alone, and is poised to overtake the $1,100 mark any day now.

Here's one of the main driving forces for the recent spike (amidst the secular upward trend):

India buys 200 tons of gold
MSN Money
The dollar is still losing its luster as the foreign reserve currency of choice.

India has bought 200 tons of gold from the International Monetary Fund at $1,045 an ounce, which is close to a recent record high of $1,070. The entire transaction is worth almost $7 billion.

The move is seen as a way for India’s central bank to move some of its capital away from investments in the dollar.

The IMF may sell another 200 tons of gold in the relatively near future and most experts expect that the buyer will be China, which has foreign currency reserves of $2 trillion and might like to have its own hedge against the value of the American buck.

India is being explicit in its concern about the long-term value of the dollar. One senior official of the central bank there told The Wall Street Journal, “It makes sense to buy gold as it will appreciate more than the U.S. dollar.”

The equity markets may stay volatile as the global economic recovery stays uncertain, giving central banks and investors another reason to move to gold as a “safe haven”.

The transition to the commodity may drive down the dollar’s value even further, which could help U.S. exporters, but that is bound to increase the concern that the dollar is no longer the most important exchange currency.

Top Stocks writer Douglas A. McIntyre is an editor at 24/7 Wall St.

http://articles.moneycentral.msn.com/Investing/top-stocks/blog.aspx?post=1351070&_blg=1,1351070

Is gold the new dollar?
MSN Money
]Is gold the new dollar?

News on Tuesday that the Reserve Bank of India, the country’s central bank, had purchased 200 metric tons of gold between October 19 and 30 from the International Monetary Fund sent gold soaring to a new all-time high.

The yellow metal closed at $1,090 an ounce. And it set loose speculation that could easily push gold to $1,300 an ounce on the current trend.

What’s set tongues wagging?

The idea that the buy by the Reserve Bank of India could be a signal that the world’s central banks are buying serious amounts of gold to hedge against a further decline in the U.S. dollar.

If India’s buying, the thinking goes, can China be far behind?

China has been quietly buying gold for years, doubling its holdings over the last six years. But the country still holds only 2% of its reserves in gold. That’s short of India’s 6.2% of reserves in gold after this buy.

But both figures are far short of the 60% average in Europe or the 77% of reserves that the U.S. holds in gold.

The global average for the percentage of reserves held in gold peaked at 32.7% in 1989. In 2008, after 20 year of selling by the world’s central banks, the global average was down to just 10.3%.

There’s enough logic to this theory to make it a powerful force in pushing up the price of gold.

The U.S. dollar does, indeed, seem to be in a long-term decline. Many of the countries with large currency reserves such as China are heavily over-weighted toward the dollar and are known to be looking for alternatives.

The currency alternatives to the dollar have their own problems ranging from low trading volumes to fiscal deficits at home.

Gold, in contrast, looks like a stable store of value for the long term.

Which may explain why it is rising not only against the U.S. dollar but against all of the world’s major trading currencies. Since the beginning of September, gold has outperformed even such “strong” currencies as the euro and the Australian dollar.

I don’t see the rally in gold ending soon. If you ran one of the world central banks, could you think of a good reason to put your faith in the U.S. dollar?

My preference at this point is for gold-mining stocks instead of gold itself. Gold miners are more leveraged to the price of gold so they’ll go up faster than the price of gold itself rises. (Down faster too, I’d note.)

I own one gold stock in Jubak’s Picks at the time of this post. To read more on Kinross Gold (KGC), check out my most recent update.

http://articles.moneycentral.msn.com/Investing/top-stocks/blog.aspx?post=1353055&_blg=1,1351070

The dollar is done, and all of the major countries aren't just "talking" anymore about dumping the dollar. I forecast that gold, the only real money left in the world, will surge to $2K by next June.
Edited by Ryan, 6 Nov 2009, 05:01 PM.
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Lundymaphone
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I would be surprised (although not shocked) if Gold could maintain a level of over $1200 next year. The danger is that when the economy does improve the dollar will improve and people will lose site of the long-term effects. This is just another "jump-the-gun" moment by central banks. It will probably take India/China decades before they are gold-primary holders, assuming they continue tp build up their gold reserves vs $$ reserves. I don't have numbers but intuition will make me look at how fast foreign holdings in Euros are climbing, I think diversification is far more likely then gold replacing US dollar.
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Maxwell Wilder
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Damn me for all those Goldschlager I wasted away!
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Ryan
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Well, if only to reiterate my points, gold is now at $1,165 after a $19 gain today alone, to start off the week.
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