Gold Hits New High
12 May 2010
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The price of gold hit a new high of $1,247/oz today, beating it’s previous high of $1,226/oz. According to the Wall Street Journal:
“Gold’s strength indicates investors view the European Union and International Monetary Fund rescue package as a short-term fix that doesn’t reduce uncertainty on how governments will reduce their high debt levels.”
The gold trust ETF, GLD, reported that its supply of gold rose to a record 1,185 tons. The trust is now the world’s sixth-largest gold stockpile, just behind the French treasury.
So is it time to sell gold? No, but its probably a good idea to keep on selling your euros or dollars for gold and silver. Gold is making new highs in almost every currency, with the exception of the Canadian loonie which has shown remarkable resilience during the economic crisis of the past few years. I would have thought that the Australian dollar would’ve have benefited from increasing commodity prices and the fact that the Reserve Bank of Australia just increased the interest rates again, but apparently not. The Aussie dollar is down about 5% over the past week. Might be a good time to go long the Aussie along with some silver.
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Almost anything can (and probably has been!) used for ‘money’ as a medium of payment. So, why is gold in particular associated with coinage and money? Why is gold such a universally recognised and accepted standard of value?
Gold is portable – Unlike many other commodities, gold is also relatively portable; gold can be melted down or cut into smaller pieces, though it does have limitations when it comes to everyday transactions…the amount of gold needed to pay for a loaf of bread is not only very difficult to cut and weigh, it would be so small that it would get lost easily lost! So, while gold buyers can not use gold in everyday transactions, gold buyers can always sell gold for its equivalent value in notes.
Gold does not degrade – Gold can be stored or hidden without fear that it will rot, rust, or be eaten by termites. Gold buyers can be certain that if they buy gold for investment, it will not depreciate physically.
Gold is durable – Gold is not destroyed by floods, fires, famine, or other natural disasters. Gold buyers can be confident that any gold will withstand just about anything!
Gold is divisible – Unlike investments of property and other commodities, gold can be melted into various forms and weights when required.
Gold purity or gold standard is uniform – Gold has a ‘standard’ unit of value, gold purity by gold weight. One ounce of pure gold is always one ounce of pure gold, unlike, for example, one carat of diamonds which are of variable quality and thus variable value. Perhaps the most vital factor to the acceptance of gold as money is that the standard of gold purity can be can be guaranteed and maintains its value; in other words, gold buyers can be confident that they can sell gold for near equal value in the future.
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