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Is this still an early stage of the gold bull market?

October 22nd, 2009

Gold prices that jumped above $1,000 an ounce this week are signaling that investors are buying metals to hedge against declines in currencies, former Federal Reserve Chairman Alan Greenspan said on Sept. 9 at an investment conference in New York.

The gains are “strictly a monetary phenomenon.” 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,” he said.

And he continued: “What is fascinating is the extent to which gold still holds reign over the financial system as the ultimate source of payment.”

Can we still have confidence in Alan Greenspan today?

After all it was his low interest policy as Fed Chairman that contributed to the liquidity bubble and the debt crisis which brought our financial system and the world economy near the collapse.

But it is a fact:

About 30 years ago gold reached its highest price at $ 873/oz.

Inflation adjusted this would translate into $ 2247/oz. today.

So at $ 1058/oz. we are still far away from this „historic all time high”!

And don’t forget:

Since Oct. 1st the gold price never felt below the $ 1000 threshold.

We already get used to it, don’t we?

I think this could very well lay the foundations for an extended rally …. with all the volatility which is inherent to precious metal markets.

And the strategic moves of some market participants mentioned in my previous posts only continue to strengthen the upward tendency!

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