Gold Once Again Rising After Dramatic Drop

Gold continues on its upward trend, with periodic drops in price. This week gold reached a new high of over $1900 per ounce, followed by a $200 drop in price. I can`t say I`m surprised by that, since every time prices soar there will be traders and speculators rushing to sell off their gold to take quick profits, and then possibly buy gold once again after the prices have fallen temporarily.

Whenever the price falls, some people will claim that the bullmarket is over and that the gold bubble has burst. But all you need to do is look at the current economic climate to know that gold is still going to be sought out as a safe haven, despite daily fluctuations due to trading. Uncertainty over Europe`s debt troubles remains, and this week`s unemployment figures in the US also resparked economic worries (well, they never really went away) and the gold price has begun approaching its all-time highs again.

You can read more about the differing interpretations of the $200 drop in the gold price in this article on Forbes.com

http://www.forbes.com/sites/afontevecchia/2011/08/25/gold-falls-10-due-to-over-extension-bullish-fundamentals-still-in-place/?feed=rss_home

Asia sees increase in gold investment as debt uncertainty continues

The Standard and Poor`s downgrading of the United States` credit rating is not the only driving investors towards gold this week. Fears over Eurozone debt is also pushing investors into gold as a safe haven. This trend is occurring all around Asia. In the video, regular everyday investors are now buying large amounts of gold, despite the fact that the gold price is as high as it has ever been. This is the reversal of the usual trend, in which investors come to sell gold when the price is high and buy gold when the price is low.

Words of wisdom regarding gold investment are also spoken in this video. Beware to those who see gold as a source of short-term profits or want to trade gold. Investing in gold is a long term strategy intended to preserve your wealth, rather than make you a huge profit. Those who violate this guideline will do so at their own risk.

Steven Leeb: Gold is now the defacto world currency

This is a very interesting video of a discussion between Peter Schiff and Steven Leeb on the Lou Dobbs show. They are discussing the latest economic chaos and the drops in the stock market and subsequent climbs in the price of gold. Peter Schiff is funny, this guy is the king of soundbytes. He says that "What we`re experiencing now is the hangover from the last round of monetary stimulus". The overspending, the borrowing, the printing of dollars that debase the US currency, have all taken their toll on the American economy. Another brilliant Schiff soundbyte is "Rather than letting the economy check into rehab, they`re shooting it up with more drugs, and we`re gonna overdose!" He says this in reference to the low interest rates intended to keep stimulating and pumping up the economy, and the lack of willingness to let the economy`s assets naturally redistribute themselves.

Steven Leeb made an impressive comment and one that has special interest to this blog. Leeb said that "Gold is now the defacto reserve currency," citing gold`s dramatic rise in price to nearly $1800 and people`s increasing trust in the integrity of gold over the integrity of the dollar.

Peter Schiff disagreed and said that the dollar doesn`t deserve to be the reserve currency anymore but that it still is because central banks are only just starting to buy gold, and because countries around the world continue to buy US dollars to prevent its collapse. Japan alone bought $50 billion US dollars last week. Japan, China, and other countries continue to do this to keep the US dollar from falling too far, so that they can continue to export to the US. Eventually this cycle will break down, but for now the dollar is being artificially resuscitated.

In any case, both agree that the future looks grim for the US economy and that the future looks bright for gold. As Peter Schiff says in the video, "You better have some gold".

Gold Price Rises and Oil Price Falls

Pension funds that invest in stocks in order to grow the funds of their members` contributions have started to buy gold to make up for losses in the prices of the shares they hold. With this week`s downgrading of the US`s credit rating from AAA to AA+, the Dow fell by a large margin and that is causing more movement into gold as a safe haven. In the case of pension funds, obviously the main intention is to preserve the value of the premiums paid by contributors, and since gold is a wealth preserver rather than a way to gamble and get rich quick, gold is a wise choice.

At the same time, in this video they mention that oil prices have been fallen because of fears of economic slowdown around the world. Silver tends to follow the price of oil, since its value too partly depends on economic activity (silver is used for many more industrial purposes than gold). Precious metals investors with holdings in gold and silver should consider these developments. Though in the long term, silver is most definitely going to rise much, much higher.

Barack Obama Says The US "Will Always Be a AAA Country"

On August 8th Barack Obama responded to the downgrading of the United States credit rating by declaring:

"This is the United States of America. No matter what some agency may say, we have always been and will always be a AAA country."

This seems like a highly delusional statement, and quite an arrogant one at that. Just because your country is the United States, that doesn`t mean that your country is immune from self-destructive and irresponsible behaviour. The US can no longer get away with borrowing money it will never be able to pay back, the US has been given a wake up call that there are consequences for their short term financial policies. But hopefully the American people won`t hold onto their delusional ideas that American can do no wrong, hopefully they will become informed of where the US dollar is headed and prepare themselves accordingly.

For those of us who refuse to delude ourselves, gold remains a comforting option and silver remains a highly exciting option in the coming days when the dollar will suffer greatly.

Senator Ron Paul: History Says Gold Is Money

In a new interview on CNBC Newsline, Senator Ron Paul made some interesting comments about gold. Nothing revolutionary if you are familiar with gold investing and the problem of fiat currency. But interesting comments nonetheless. Some of his commments were as follows:

Obviously gold is money. And it`s not because I say it`s money, it`s because history says that gold is money.

This was in response to comments made by chairman of the federal reserve Ben Bernanke that gold is not money, after being asked by the Senator whether gold is indeed money. Senator Paul labelled the comments as humorous, since the historical evidence that gold is money is, shall we say, overwhelming.

After hearing Bernanke`s reply that gold is not money, Ron Paul then asked why the Fed has so much of it if it`s not money. The chairman`s reply was "Because it`s tradition".

Of course Bernanke could not publicly announce that gold is money, given that such an announcement could result in masses of people using their dollars to buy gold, resulting in an even weaker US dollar. By attempting to downplay the value of gold as money, he is trying to limit increases in the demand for gold in order to protect the perceived value and integrity of the US dollar.

Another interesting comment by Senator Paul was that "Gold is acting as a very strong currency right now because people are very very nervous. Guess what? They`re going to gold." Paul made the comment that he doesn`t want to dictate a gold standard but that he wants the market to dictate what currency reigns supreme, and that the federal reserve should have competition so that we would not be the slave to its monetary policy. Perhaps some competition would force the fed to maintain the US dollar`s integrity, to whatever extent that is now possible (it may be a lost cause at this point). Paul would make sure it remained legal in practice to use gold and silver as legal tender.

Indeed, gold is money as history proves and is continuing to prove this very moment.

Peter Schiff Says Gold Will Reach $10,000 Per Ounce

In this video Peter Schiff of Euro Pacific Capital is asked about a previous quote in which he suggests that gold could reach a price as high as $10,000 per ounce. At the time this video was recorded, the Dow`s value lied at around 10,000. Schiff clarifies in the video that the value of the Dow could move up or down, but that he predicts a one to one ratio of the gold price to the down. That means thathttp://www.blogger.com/img/blank.gif it would cost 1 ounce of gold to buy one share of the Dow. So if the Dow stays at 10,000, then the price of gold will also end up somewhere around $10,000.

The one to one ratio also occurred in 1929 and 1980, at the peak of gold`s bull markets. Today the Dow is at approximately 12,500, so if the gold to dow ratio was one to one today, then it gold would cost $12,500 per ounce.

According to Mike Maloney of goldsilver.com, the gold price could reach as high as $15,000 per ounce. In light of this prediction, Schiff`s prediction seems thoroughly credible.

US Debt Crisit Sends Gold Price to All Time High

This week gold reached a new all time high of $1630 US dollars. Of course, along the way to this new milestone, gold has hit many all time highs and will hit more as it continues to increase in value. The commodities and precious metals bull market still has years ahead of it, and global ecnomic uncertainty continues to push the gold price upwards, and the US`s longterm economic troubles and the near-certain continued decline of the US dollar all make the price of gold continue to rise.

The US has declined over the past year or two, making the US dollar gold price increase more than the value of gold has increased. If the value of the US dollar decreases while the value of gold stays the same or rises only slightly, then the US dollar price of gold will rise. So the degree of the increase in the gold price is somewhat artificial if you are reading it in USD. But even in a currency like the Japanese yen that has held steady much more than the US dollar, the price of gold has risen steadily over the past couple of years. So regardless of currency, precious metals are still in a bull market and gold is still being used as a safe haven investment.

The new all time high this week was related to the American debates over debt, the debt ceiling, and a possible default on the US`s debt. A US default would be an extremely frightening situation for most, since it would seriously harm the credibility of the US government and its ability to pay back its debts. Such damage to the US`s credibility could lead to the dropping of US debt instruments or reluctance to purchase more. The value of the US dollar could be severely affected by this.

The good news for people with investments in gold is that the collapse of the dollar will make their gold even more valuable. As I alluded to above, a simple increase in the USD value of gold itself doesn`t mean that gold has increased in value. But it does mean that those with investments in gold will avoid losing the value of their wealth. And if US dollar denominated assets drastistically drop in value, those who own gold will be in the perfect position to liquidate their gold and buy up US dollar assets at rock bottom prices.

This scenario will in all likelihood happen at some point in the next few years. The question is, will it happen in the immediate future when the US government makes a decision on whether to increase the debt ceiling or not? I seriously doubt that the US will default right now. I think a lot of politicians are milking the current debates for all they are worth. There will be a time when defaults are unavoidable, but I don`t think that will be in the immeidate future.

Gold will continue to rise anyway.