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Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: long-gone who wrote (27270)	1/29/1999 2:24:00 PM
From: Hawkmoon	Read Replies (2) \| Respond to of 116762

Richard, That was then and this is now. The dollar was strong because after gold peaked at $850/ounce in the speculative run-up in the early '80's, gold speculators started looking for a different place to put their money. Since there was little value in continuing to hold gold as inflation came under control through the '80s, they bought dollars (it makes sense they would). So when you equate the strength of the dollar vs gold, you should consider that both were "strong" as a result of this equilibrium they had established. But that equilibrium was destroyed over the past years as it became apparent that the US economy had to maintain more growth in order to prevent economic problems in Asia and Latin America. The US had to maintain the position of economic engine until these other economies sorted things out. Thus, they had to maintain the strength of the dollar which provided a ready marketplace for their goods while adding liquidity to banks (printing money and increasing money supply). The only way to do this was to quash gold in order to maintain the illusion (and I freely admit they probably did this). Quash gold and you maintain the perceived strength of the dollar. You sacrifice a particular commodity (gold in this case) to protect the rest of the economy. The same situation stands in the case of oil. Apparently the US is buying increasing quantities of Iraqi oil in the "food for oil" program. Were the price of oil to suddenly rise, you can believe that the US would try and find a way to minimize these increase on our economy to prevent another oil shock. Higher oil prices equate to higher unexpected costs for US industry, lowered margins of profitability for non-petrolueum companies, and inflation in the US economy as the oil rises in price vs the dollar (review history of oil embargo and the inflationary pressures it brought worldwide. Regards, Ron