Posted on 10/08/2008 5:41:58 PM PDT by TigerLikesRooster
Gold rallies anew on inflation fears amid rate cuts
By Moming Zhou, MarketWatch
Last update: 4:15 p.m. EDT Oct. 8, 2008
SAN FRANCISCO (MarketWatch) -- Gold futures closed above $900 per ounce Wednesday to tally a three-session rise of 8.8% as investors sought refuge against inflation after major central banks around the world cut interest rates in concert.
The Federal Reserve, European Central Bank and four other central banks lowered interest rates in a coordinated effort to combat world's deepening financial turmoil.
"Coordinated central bank aggressive interest rate cuts should lead to gold surging in value in the coming months" as "currency devaluations look increasingly likely," said Mark O'Byrne, executive director at Gold and Silver Investments. Gold for December delivery gained $24.50, or 2.8%, to close at $906.50 an ounce on the Comex division of the New York Mercantile Exchange. It was the first time the contract topped the $900 level since Sept. 29.
The metal has climbed $73.30 from Friday's closing level as investors snapped up the precious metal as a safe haven amid the financial turmoil.
(Excerpt) Read more at marketwatch.com ...
What is an ADV?
Avg. Daily Vol.
That reveals precisely my question. Why should anyone trust silver or gold? Because thousands of years of human culture have irrationally placed value on these two very "ordinary" elements? They are shiny, and rare. They have remarkable properties, to be sure, but the Egyptians were not informed of these properties 4,000 years ago when they valued them.
What is the intrinsic (economic) value of gold in a world economy that no longer prices it relative to other economic instruments? It strikes me that gold's value is strictly dependent on an economic system that has afforded it value as a traded commodity. Gold is currently worth $900; OK then. What happens if the dollar doesn't exist? Doesn't the prospective value of gold depend on a continued reliance on the way the world works right now?
I would be careful on that. The Dollar and Gold both rising at the same time indicates different strategies.
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