In recent trading gold jumped $45/oz to $1043/oz on news that the Chinese government was proposing to use gold to pay for oil.
According to the Independent Newspaper "The greenback's declining value has prompted the Chinese, French, Russian and Japanese governments to hold secret meetings with the Middle East's major oil producers to develop a new pricing system for barrels of oil".The significance of this of course is that gold is going to be held by commodity traders rather than USD because traders fear losing money whilst they negotiate market positions. You can imagine the negative impact on traders holding USD as the price falls. Of course in the long term, it matters little. If the USD falls, then the oil producers will simply raise the price of oil to compensate for the diminishing price of oil in USD terms.
In case your wondering, my father still does not hold any gold stocks. There is just no convincing him. I told him there would be a financial collapse too. I reiterated my arguments every time I saw him for 8 years....it took me 30 minutes to get him to acknowledge the fact. Is there hope for gold? I hope he has a strong heart. :)
Of course all precious metals will benefit, but this is particularly good for gold and silver because they are the most liquid commodities, and demand for gold is particularly less impacted by negative industrial demand. But I caution you - the speculative demand for these metals will eclipse the industrial demand. This is of course just the start of things to come.
More news on this story at SMH Online.
Andrew Sheldon www.sheldonthinks.com