Monday, 20 October 2008

Why isn’t the price of gold surging?

Gold is an important part of some frontier market economies (e.g. Tanzania). Gold is stubbonly at $800 an ounce, down 22% since its high of $1,030 on March 17. The weakness might be that inflation might be the next big scare. After all, every central bank is flooding the credit markets with liquidity. Printing money in this way always leads to inflation in either goods and services and/or assets.

Inflation: The price we pay will have to pay avoid deflation and a liquidity trap? Worth thinking about.

1 comment:

haljett said...

It's a complex reason. From what some consider a concerted effort of some to suppress the price to factors like the strengthened dollar because the financial woes are global and people are reacting emotionally and pulling their money out of investments and placing it back where they feel secure and at home, the US dollar.

I think that gold will rise, even though as I am currently watching it in real time with ExactPrice it is trading at $787.70.

All the trillions of dollars that will be printed out of nothing by the FED will in 12 to 36 months be fully digested by the markets and more than likely in my opinion lead to a large inflationary bubble thus driving gold and silver way up.

Time will tell. But that's my take on it.