To: Ken Benes who wrote (74929 ) 8/13/2001 5:42:48 PM From: Tommaso Read Replies (2) | Respond to I think the key to direction of gold could be whether the Euro countries and others start following our Fed in increasing money and credit.In sum, for a currency to maintain its global reserve status, its manager, the central bank, has to inspire the confidence of global investors that it will preserve internal price stability. It's difficult for me to see Alan Greenspan being able to maintain that confidence among investors if he puts the federal funds rate at or below the inflation rate at the same time that the US money supply is ballooning. At the margin, global investors are likely to move their cash reserves into a currency that offers an "honest" return, that is, a currency earning a positive real overnight return. Right now, the European currencies look more "honest" than the US dollar. If European central bankers cave in to the global inflationists, then gold would be expected to take on more of a reserve-currency glitter.
