Gold will keep its shine

While Soros has made some great calls on markets he has also made some major bluners – he is only human. His arguments against gold are based on the belief that an increase in interest rates is coming as the world economy has supposedly emerged out of recession. If you look through the propaganda and use common sense, you will understand that the so-called growth is simply government spending which is piling up the debt levels and of course the interest bill attached to it. The likes of Britain and America are caught in a debt-trap where they simply cannot put rates up without wiping out the economy. The easy way out is to print more money and inflate. This has happened time and again in developing countries and will lead to a devaluaiton of the dollar which is losing credibility as the world’s Reserve Currency.

The gold price is simply a thermometer for the creation of money. It has kept its purchasing power since the Middle Ages such that the same amount of gold buys the equivalent good that was available then and now. In the short-term the price is likely to fall back below $1,000 (current price $1,090) albeit temporarily. This is because we are in for a second wave of stockmarkets declines which tends to pull down all asset prices including gold. In a sell-off the good is sold with the bad but bullion will emerge again with a significant rally. Gold returned 280% in the last decade while shares were negative over the same ten year period. This is nothing new and happened in the Great Depression as well. There is a long-term cycle that benefits commodities but beats up financial markets and vice-versa. Soros’ ex-business partner Jim Rogers has highlighted this cycle which tends to last 17 years – I believe we have at least 7 years more of rising gold prices and an equivalent period where stock markets will fall then stay flat. It’s all happened before.
 

Source: Guernsey Press 30 January 2010 'Gold will keep its shine' by Anna Brehaut