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Barisheff points out that there are two fundamental ways of looking at gold: The western view sees it as just a wealth-gaining asset while the eastern view subscribed to by India, China and Middle East is that the yel..

12 Oct 2011

By Commodity Online
Gold market is not a bubble but having the potential to move higher to $10,000 an ounce, according to Nick Barisheff, leading commentator on finance and markets and President and CEO of Bullion Management Group, Inc. His upcoming book, ‘$10,000 Gold- Why it will get there sooner than you may expect’ is based on this bullish premise for the yellow metal.

Barisheff  points out that there are two fundamental ways of looking at gold: The western view sees it as just a wealth-gaining asset while the eastern view subscribed to by India, China and Middle East is that the yellow metal is a wealth-preserving  asset that serves the purpose of money.

He points out that gold is still money. Since 2009, central banks have become net buyers of gold. Pension fund manager Shane McGuire makes the point in his book, Hard Money: Taking Gold to a Higher Investment Level , that gold and silver are really the newest asset class, not the oldest, since until 40 years ago they were money. Many readers will remember a time when silver dollars were exchanged in stores at face value.

Gold would continue to be the favorite of investors on loss of purchasing power of money, the inflationary effects of money creation and some irreversible trends

A basket of goods that cost $100 in 1800 would have cost $102 in 1900. During this time, the dollar was pegged to gold. Today that same basket would cost over $4,000. This is what we mean by loss of purchasing power. Over the past decade, the Canadian dollar, the euro and the Japanese yen have lost over 70 percent of their purchasing power against gold . The US dollar and the British pound have lost over 80 percent.

Finally, there are many independent trends that are having a direct impact on the price of gold. The most prominent are central bank buying, Chinese and Indian buying, the movement away from the US dollar, peak gold and under-investment in gold by pension funds.

Central banks were net sellers for nearly two decades until 2009, when they officially became net buyers. We can expect this trend to last two decades as well. During the gold “bull” market of the late 1970s, the Chinese public was not allowed to own gold. Today, their government encourages gold ownership, and has even made several significant innovations to facilitate this goal. The Chinese government has also led by example, with China’s central bank publicly stating it would like to increase its reserves from 1,100 to 6,000 tonnes. Unofficially, they have stated a target of 10,000 tonnes.

(Courtesy: www.bmgbullion.com)


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COMMENTS (1)
Name
13 Oct 2011
DOW 36,000 anyone? Prices are always and everywhere a psychological phenomenon. I think it's just really hard to predict the future. I'm not saying it can't happen,but I wouldn't count on it.
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