Weak dollar the only reason for the rise of gold?
Every day we are witnessing a new record price for gold and a lower price of the dollar.
And we are quick to explain it:
There are the carry trades: to take on debt in US-Dollar costs a littlebid more than nothing and this money will be invested in assets like p.e. gold.
With an interest level of more or less zero you don’t bother that gold is an asset that does not pay any interest.
Other comments point to the US public deficit and to a possible inflation at the horizon.
So the rising gold price seems to be the parallel of the falling dollar.
But don’t these explanations focus too much on the dollar?
Is the public deficit and the accumulated debt of the Euro – countries so much better than those of the US ?
European economic growth perspectives are worse than that of the more dynamic US economy!
Japan with its extremely low interest level already spends 23% of its budget for interest on its public debt.
Do the Asian sovereign investors really have so much more faith in the Japanese Yen or the Euro when they try to diversify their currency reserves?
Isn’t Allen Greanspan right when he says that the „rising prices of precious metals and other commodities are an indication of a very early stage of an endeavor to move away from paper currencies.”?
This would mean a move away from all paper currencies!
Will public debt problems jump faster from the Arabian desert into the European monetary union than we think?
Members like Greece, Italy or Portugal are already in a worse situation than many people believe. Dubai could only be the starting point of a more widespread crisis.
I think if gold will hold or move up when the Dollar is at least temporarily strengthening this will be a clear indicatior that we are in a multi-year gold bull market which will us take much higher than the next threshold of $ 1’200 .
Don’t forget that the „All time high” of gold at $ 873/oz. about 30 years ago today would translate into $ 2247/oz. !