(Thumbnail image: The Telegraph)
The price of gold continued to climb to record highs Wednesday as the U.S. Federal Reserve said it would keep interest rates exceptionally low for an extended period of time.
The announcement, which came at the end of the Central Bank’s two-day policy meeting, means that the U.S. dollar will continue to weaken in world currency markets. This has media outlets talking about the gold rally, as investors try to store their wealth in other places.
We’re looking at perspectives from The Financial Post, BullionVault.com, Fox Business, CNN Money, Forbes, KOVR Sacramento and CNBC.
CNN Money explains the implications of the Fed’s announcement.
“The dollar, which is down 6% this year, has been pressured by concerns about the growing U.S. budget deficit and rock bottom interest rates…A weaker greenback makes dollar-denominated commodities such as gold and crude oil cheaper for buyers in other currencies.”
Peter Schiff of Euro Pacific Capital speaks to FOX Business and says gold is a good investment because of the flawed monetary policies that the U.S. government is implementing.
“If we keep debasing the dollar and it appears we’re going to do that because unfortunately, the government thinks the answer to our economic problems is to create inflation to try to artificially stimulate more consumption when that’s the wrong thing to do. They’re actually interfering. If we’re going to have a real recovery in this country it’s going to be led by savings, investment and production but the longer we delay that, the more we create inflation, the weaker the dollar is going to get and the higher the price of gold is going to go.”
A CNBC panelist says while commodities are a good way to protect your money against potential inflation fueled by lower interest rates, investors may have missed out on gold.
“We’ve been focusing more on commodities like oil and the metals because we think that gold has already rallied a lot out of its function as a recession hedge over the course of the last year or so.”
With interest rates dragging down the U.S. dollar, gold is on the rise. The CEO of U.S. Global Investors tells Forbes.com there’s a fundamental shift in who is buying gold, and it’s driving the price higher.
“Jewelry demand has been the biggest component of the demand equation for gold…But what’s taking place now is called the price makers. The price makers are financial entities that are saying, 'We want to have gold as an insurance in our portfolio.' And I’ve found that gold can go up if you have any type of strong financial instability.”
The Financial Post took note of India’s surprise purchase of 200 metric tons of gold on Tuesday.
“...the increasing demand for gold as a hedge against the greenback was helping to set the stage for an alternative reserve currency or asset to the U.S. dollar, a proposal that has been trumpeted by countries such as China, France, India and Russia”
But BullionVault.com warns investors against jumping on the anti-U.S. dollar bandwagon.
“Rumors of the Dollar's imminent demise are likely to prove premature...[But] to a significant degree, gold is already behaving as though it is an international currency.”
The CBS affiliate in Sacramento takes the issue off Wall Street and on to Main Street where unemployment is driving people to search for gold.
“Well the price of gold has skyrocketed from about $750 an ounce a year ago to more than $1,000 today. So It’s no surprise that that’s led to a new California gold rush.”
So what do you think will happen to the price of gold with interest rates remaining low?
Copy the code and paste it to your blog or website:
