Why $1,000 an ounce isn’t the peak for gold – MoneyWeek

Itwasabitofrecord-breakingdayyesterday。

Goldtouched$1,000anounce,anominal(excludinginflation,inotherwords)record。

Crudeoilhit$111abarrel,arecordevenifyoudoadjustforinflation。

Whytheongoingsurgeinkeycommodityprices?

Well,it’sdowntothedollar,whichalsobrokeaseriesofrecords,thoughonthewaydown,ratherthanthewayup。

TheUScurrencyhitarecordlowofmorethan$1。

56againsttheeuro;italsonearlyhit$1toaSwissfranc(aclassicsafehavencurrency)forthefirsttimeinhistory,accordingtoTheTelegraph。

Meanwhile,itfellbelow100yenforthefirsttimein12years。

Sowhythecollapse–andwhat’snext?

Thedollartookadiveyesterday。

Februaryretailsalesfellby0。

6%。

Thiscomeshotontheheelsofterribleunemploymentdataattheendoflastweek–theUSeconomyshed63,000jobsinFebruary,themostinfiveyears。

ThenewsmerelyconfirmedformostpeoplethatiftheUSwasn’talreadyinarecessionattheendoflastyear,itcertainlyisnow。

AnotherbigworrywasproblemsattheCarlyleCapitalCorpfund。

Thegrouphasdefaultedonaround$16。

6bnofdebt,anditlookslikeitscreditorsarelikelytoseizeitsremainingassetsleavinginvestorswithverylittle,ifanything。

TheprivateequityfirmhadinvestedinAAA-mortgage-backeddebtissuedbyFreddieMacandFannieMae,whichwasseenasatthesafeendofmortgagedebt。

Thefactthatthefundhasbeendriventothewallnowhasinvestorsworriedthatafloodofmortgage-backedsecuritieswillhitthemarket,drivingpricesdownfurther,andleadingtomorewrite-downs。

TheFederalReserveandtheUSgovernmentarestilldesperatelytryingtobailoutthemarketsandtheeconomy。

Onetacticbeingusedissheerdenial;TreasurySecretaryHankPaulsonisstilltalkingaboutsupportfora“strongdollar”policy。

Ofcourse,MrPaulsonwasalsotalkingabouttheUShousingmarketbottomingoutaboutayearago。

IsuspectthatAlistairDarlingandGordonBrownwillalsostillbetalkingabouttheUK’sfundamentalstabilitywhenwe’relookingatdouble-digithousepricefallsandrisingunemployment。

MrPaulsonisalsolookingatwaystoimproveregulationovermortgagelendingstandards。

Abitlateforthatnow,Hank。

Theothertacticistotossmoneyrandomlyattheproblem。

Earlierthisweek,themarketssurgedastheFeddecideditwouldtakeawiderrangeofdodgymortgage-backedcollateralinexchangeforupto$200bnof28-dayloans。

WithmarketsalreadyexpectingthattheFedwillcutinterestratesbyatleast50basispointsatitsnextmeetingonMarch18th,it’snosurprisethatthedollarhasfallenoffacliff。

Andinturnthat’sboostedgold。

Nowthatit’sreachedtheheadyheightsof$1,000anounce,manypeoplewillbetemptedtotakeprofits。

Buttheyellowmetalmayyethavefurthertogo。

Ininflation-adjustedterms,itwouldstillhavetohit$2,500anouncetosetanewrecordinrealterms。

Andtheforcesdrivingithigherdon’tlooksettogoawayanytimesoon。

Thoselivinginfearoftheplungingdollararepilingintotheeurofornow。

ButasDavidBloomatHSBCpointsout,theyarefocusingontherelativelystrongGermaneconomyandignoringthefactthatcountrieslikeSpain,IrelandandItalyareintrouble。

“Thisisabigmistake。

WewillsoonseecontagionfromtheUSandthenbothsterlingandtheeurowillbeintrouble,”hetoldTheTelegraph。

PeterHambroofPeterHambroMiningaddsthat“We’relivingthroughaperiodofcompetitivedevaluationsacrosstheworld。

Everybodyistryingtostimulatetheireconomybydrivingdowntheirowncurrencies。



Thatleavesgoldinpolepositionasthestrongestcurrencyintheworld。

Youcanlearnmoreaboutinvestingingoldhere。

Also,ifgoldlooksalittletooheadyforyouattheselevels,mycolleagueDominichasturnedhisattentiontosomeverycheap-lookingminingstocksinthelatestissueofMoneyWeek,outtoday。

Ifyou’renotalreadyasubscriber,youcangetyourfirstthreeissuesfreebyclickinghere:3-weekfreetrial。

Oh,andjustbeforeweturntothemarkets–IrealisealotofyouhavebeenlookingformoreinformationonStephenBland’snewinvestmentnewsletter(Stephenwroteacoverstoryforusonhishigh-yieldportfoliostrategyearlierthisyear–ifyoumissedit,youcanreadithere:Thelazyinvestorsguidetomakingmoney。

ThegoodnewsisthatStephen’snewsletterisabouttolaunchyoucanlearnmoreaboutithere:TheDividendLetter


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