Gold breaks support - going to new highs

The price of gold has broken its previous high, quashing any fears of a fall back to support. We are looking forward to gold going over $2,000/oz. Some commentators think gold is over-priced, but there are several reasons why gold is not over-priced:
1. Paper money is being printed by global governments to cover debts
2. Gold rose to $850/oz in 1981, so if you consider almost 30 years of inflation, gold has a long way to go. In fact as recently as last year producers were struggling to stay ahead of costs.
3. Interest rates are very low, inflationary pressures are going to build, creating a negative rate environment. Governments are constrained from rising interest rates by high household debt levels, at a time when people are losing their jobs.
If you want to know more about the political philosophy behind markets, and their manipulation by governments, in coming months we will be releasing a number of eBooks which discuss how these state of affairs have developed, and how they need to be reformed.
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Andrew Sheldon www.sheldonthinks.com

China seeks to use gold as money

Years ago I had an argument with my dad over the role of gold. He saw the fall of gold in the 1990s to $260/oz, and concluded that the problem with gold is 'it no longer has any uses'. What's it used for? I long maintained that it was real money, that it was nobodies obligation. This belief stemmed from my studies at the time on the history of gold. Gold was not somebody's line of credit. It was tangible, it was real, as opposed to a promissory note from the government.
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.
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Andrew Sheldon www.sheldonthinks.com