Saturday, September 12, 2009

Gold breaks a barrier, again

Yesterday, gold broke the $1,000-per-ounce mark for the third time in less than 12 months. Peter Schiff comments:
[T]here is no shortage of market analysts who are not buying gold while questioning the motives of those who are. Although they offer a variety of strained reasons, they nearly all agree that it has nothing to do with inflation, which is nearly universally considered dead and buried. As a self-confessed gold bug, I can assure all that inflation is the only reason I buy gold. And recently, I'm buying a lot. . . .

While there are those who buy gold to speculate on its appreciation, the underlying factor that drives that appreciation in the first place will always be inflation. If governments were not creating inflation, there would be little investment advantage to owning gold. . .

When economies move into recession, there is always political pressure for governments to intervene. Their one tool is the printing press. . .

Most analysts, however, simply look at the dubious CPI to determine the presence of inflation and inflation expectations. They perennially forget that prices are a lagging indicator and only a symptom of inflation, and may in fact not be rising at the moment when inflation kicks into high gear.

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