George--As long as the central banks are willing and able to intervene, one result is that U.S. Treasury bonds continue to be the safe haven that in traditional market panics was held by gold or gold shares. That role for gold has ceased to exist since 1987, when the Federal Reserve demonstrated that it can be flexible and fairly quick when it comes to adjusting the money supply. The last months of 1987 were in effect the death knell for gold as a last recourse, and the price has declined accordingly.
Furthermore, during the 1980's the gold mining companies developed an improved technology that boosted the yield from existing mines, making it less necessary to rely on the high yields that traditionally came from South African mines. The result is that companies with reserves such as Newmont's Carlin mine can make money even if gold prices fall back to $225. Under these circumstances, gold at best is a very short term investment, and not nearly as desirable as Treasuries when you're looking at large amounts of money.
On the other hand, with assets of banks doing business with terrorist organizations likely to be frozen, you just might see the Taliban and their crew trying to get their hands on some kind of gold assets. They may have no other choice, in which case, the price of gold could appreciate even more. If it were discovered that the terrorists were resorting to gold, then I expect there would be a concerted effort among western nations to sell gold reserves and drive down the price!
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