Gold Above $1600

With the U.S. dollar, pound sterling (“£”) and the euro continuing to devalue, gold breaks over $1600. The nominal all-time high is seen as the global economy is running out of paper currency. While silver is back above $40, gold keeps moving cautiously forward.

Meanwhile, the latest act to crawl out of the US economic hole, in another attempt for Washington to pay its bills, Congress proposes several caps of wasteful spending that will adversely affect SS and Medicare. Republicans and Democrats are trying to craft a plan that could avert an unprecedented government default. But, each proposal further disconnects the government from its people from servicing what people expect from their officials to provide. Such leaves little faith in politicians, central banks and in fiat currency. Thus, the trust in the economic disease comes up with the old adage, “fool me once shame on you…fool me twice…”

Many cards have been played to lift the US economy, pull the American economy out of the recession with several QE stimulus programs. But since there’s no Superman to fly around the world backwards to get us out of the weak housing markets—one of the primary sectors of past recoveries has further delayed the recovery of the U.S. economy. Not since the Great Depression has housing sector weakened to such overhang. And it will not stop for several years. Especially now, that ‘testing banks’ have the rights to cut credit lines is a nightmare! It indicates a long walk home as house prices continue to remain relatively flat and new home construction activity will remain well below levels experienced during past recoveries.

People today want to know that they own something that will at least retain its value when the dollar and all the world’s fiat currencies are in such a mess. And all fiat currencies are a mess these days, except the Singapore dollar, Norwegian krone and Swiss franc. If Congress pops out some last minute deal to continue the US towards the cement wall…gold may correct, but $1800 to $2000 by the end of the year is more likely as many have predicted. Price growth will slow as governments and banks try to manipulate the market–margin raises etc., and some countries in financial trouble will probably dump a load. But gold will get snatched up by Asian countries to rise further with silver coming to an all time high by Jan 2012

Any concern about the fate of the U.S. dollar as America flails about for solutions proves, gold will be the currency to ride out the storm. “Inflation, deflation or stagflation, the global currency to trust… and the only one without the burden of politicians manipulating its value is gold”, says President Ron Fricke of Regal Asset.

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