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Old 12-03-2009, 01:19 PM
Franc Tireur Franc Tireur is offline
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Investors taking contradictory path with gold

Gold's near vertical rise to new records is starting to puzzle many investors who are trying to square arguments fuelling its rise with seemingly conflicting moves in risky assets like equities or inflation-protected securities.

This is not the stuff of a traditional gold rally, some argue, and suggests momentum alone rather than any watertight rationale is driving gold's recent surge.

The commonest answer to why gold has been rising has been that the dollar has been weakening, making the metal, which is sold in dollars, cheaper in other currencies and acting as a hedge for dollar investors.

But the strong inverse correlation between the two is fairly recent. As little as six months ago it was not there.

Even closer than that -- in early October and early November -- there were periods when the two failed to march in lockstep at all.

So there must be something else at work at well, given that spot gold hit another record high, above $1,226 an ounce, on Thursday.


Congo's Gold

Five million people have died in the Democratic Republic of Congo in a war fueled primarily from gold mined in the country by warlords and smuggled out to be sold on the open market. Scott Pelley reports.

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Old 12-03-2009, 10:35 PM
VonoreTn VonoreTn is offline
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I'm thinking the rise in gold is easy to explain. The US dollar is highly influential currency in the world, and we currently have a US government appearing intent on devaluing the currency with excessive and unnecessary debt, same for spending, plus record levels of printing dollars. They seem deliberate in damaging the currency since they show no sign of understanding the ramifications of what they are doing. They furthermore have stacked up expensive new programs that will damage the US economy, (Cap and Trade, national health care, card check, etc.)

And to the people who see this trend as unresponsive to warnings by economists, the obvious choice is to bet against the dollar, and gold is a quick way to do it. As stated in your reference, gold is nowhere near its historical high yet, adjusted for inflation, and when it dropped before we had Reagan to thank, for doing the opposite of what the US government is doing now. He cut tax rates, controlled union strikes, and controlled the growth of government.
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