I would argue that war is the most important factor because people don't trust investments based on economic growth when a war can put that growth in jeopardy. Inflation is also not an issue at this time because all the data we've seen points, if anything, to deflation. The rate of exchange only becomes a factor if the dollar drops against not only the Euro and the yen but against Indian and Chinese currencies, since the Indians and Chinese are traditionally inclined to put many of their assets into gold, either in the form of bullion, coins, or jewelry.
The current series of earnings warnings coming out from U.S. companies gives even more incentive to invest in gold or gold shares. Lower earnings, or earnings falling below earlier estimates send a signal that investors should avoid hundreds of key stocks. That leaves gold as an alternative, particularly when gold prices have advanced to the point where even marginal producers are able to make a profit. Not being a gold bug (but being pragmatic, nonetheless), I'm finding fewer and fewer non-gold investments worth holding at present. Among the companies with continuing good prospects is QUALCOMM, owing to expansion of wireless in China and India, and particularly owing to the fact that the company is virtually debt free. However, the proposed tax reform could hurt companies like QUALCOMM, which, while it has operating profits, must still invest its retained earnings in new ventures in order to speed the adoption of its proprietary technology.
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