I couldn’t find any dedicated articles on it in the major newspapers today. Some papers didn’t even mention it all. No, the big news in the financial newspapers today was on oil reaching $70 U.S. a barrel.
To me, the big financial news yesterday was this:
Gold bullion prices jumped $18.90 U.S. an ounce–its biggest one day price increase since the September 11, 2001 terrorist attacks in the U.S. Gold has moved to another record 25-year high and the media isn’t picking up on it. Shhh… Better keep it quiet anyway. The less people that know about the bull market in gold, the more money we will make on our gold stocks.
I’m sure the Federal Reserve is watching the gold market and possibly worried gold could replace the U.S. dollar as the official reserve of many foreign currencies… somewhere down the road. That’s one reason I believe interest rates have been rising in the U.S. Gold doesn’t pay a dividend. But with six-month U.S. T- bills approaching a payout of 5%, the U.S. dollar is obviously a good alternative to gold bullion. But, if this is the case, why has gold continued to rise in price?
Gold is rising in price because investors are worried about the debt situation and trade deficit in America. We’ve always known the U.S. Fed could expand and contract the money supply, and that was okay for many years. But, with the debt situation in the U.S. getting so out of hand, more dollars in an environment of rising debt presents a different picture.
It is now said that the U.S. government spends about $2 billion more a day than it takes in. If this fiscal situation doesn’t improve, the eventual outcome will likely be disastrous. And with so little gold around, the yellow metal could become very valuable. The smart money, who have been big gold buyers, know that.
China’s currency reserve in February climbed to $850 billion. China has now officially surpassed Japan as the world’s largest holder of foreign currencies. With about 75% of China’s foreign reserves in U.S. dollars and only 1% in gold bullion, should countries like China decide to lower their U.S. dollar reserves and increase their gold holdings; the price of gold bullion could literally go through the proverbial roof. Its public knowledge China has been encouraging its citizens to buy gold.
I, for one (or should I phrase it “as one of the few who”), believe gold prices are headed much higher. And, as I’ve written many times before (since 2001 to be exact), it’s still not too late to get a position in quality gold stocks.