Why Gold Can't Be Stopped
By Kevin Grewal 11/04/09 - 11:29 AM EST
NEW YORK (TheStreet) -- Tuesday gold surged to an all-time high of $1,079.70 per ounce. There are plenty of signs that suggest the precious metal will be able to sustain these levels.
More on GLD Gold Futures Hit Record HighGold:
As the U.S. government has opted to print massive amounts of money to revamp an economy severely impacted by the global recession, the result has been a falling dollar and fears of inflation. Both of these results don't seem to be going away anytime soon and will likely loom in the near future. Additionally, the U.S. central bank is likely to keep interest rates at their current levels, putting further pressure on an already weak dollar, making it cheaper and more attractive to investors holding stronger currencies. In fact, the International Monetary Fund announced that the Reserve Bank of India recently purchased 200 metric tons of gold. In addition, China, which bought 403 metric tons in September, is expected to buy up a large sum of gold to add to its inventory.
From a microeconomic perspective, supply-and-demand pressures will likely cause gold prices to stay elevated. Supply of the precious metal is starting to be constrained, as Australia and South Africa, two of the three largest gold producers, have witnessed decreases in production, while demand is expected to elevate.
Lastly, gold remains attractive because it offers diversity, liquidity and safety from an asset class or specific sector that is underperforming.
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