Capital Gold group Report: Gold’s Rise: It’s Not Just Armageddon
THE price of gold has always been a way to keep score of economic, financial and political instability, but the game may be changing. The dollar is weak, inflation is troublesome and the world isn’t getting any safer, but it is hard to see how those factors alone drove gold from just over $250 an ounce in 2001 to more than $900.
The decline in the dollar over the same time works out to less than 5 percent a year. The reported level of inflation is a fairly ordinary 3 percent or so, and government calculations do not take account of falling home prices and technological innovations that give consumers more bytes for the buck. As for politics, terrorism remains a threat, but it seems no greater or smaller than it has been most of the decade.
What has changed, many say, is that gold no longer benefits just from threats to prosperity but from prosperity itself.
“Gold is the ultimate commodity, and it carries the added cachet as a safe haven,” said Robert D. Arnott, chairman of Research Affiliates, an asset-management firm. “Demand for gold plays a role in a strong economy, in a turbulent economy and also when there’s inflation.”
The supply-demand balance could send gold to $1,000 an ounce before long, said Vahid Fathi, an analyst for Morningstar. New supplies of ore are hard to find, he noted, and central banks have scaled back bullion sales. As for demand, it is strong from “the new class of prosperous consumers out there in China and India that traditionally have an affection for gold,” he said. . . .
