THE OBSERVER: Gold price may go beyond record high to top $2,000 an ounce as bullion sales rocket and central banks stock up
Goldfinger, the villain of the eponymous James Bond film, hatched a plot to increase the value of his bullion by detonating a nuclear device inside Fort Knox, making America's gold supply radioactive for 60 years. No less exciting, though rather more unsettling, is the real-life drama taking place on the world's financial markets, where investors have piled into gold on fears that capitalism is about to crumble.
As a result, the gold price has soared to record levels, rising 9% this year to reach a peak of $1,264.90 (£834.44) an ounce, with influential names in the world of finance predicting it could top $2,000. Among them is Jim Rogers, the investment guru who called the start of the commodities rally in 1999.
Having narrowly averted a financial Armageddon in 2008, investors are worried the authorities have transferred western indebtedness from banks and consumers to national governments.
In their worst moments, panicky investors and savers visualise a world that has been turned upside down by a sovereign debt crisis that breaks both the euro and flattens the once mighty dollar. As the west sinks into a quagmire of its own making, demand plummets and the world is dragged into another Great Depression. Even the emerging markets of China, India and Brazil are affected as export markets shrivel. Political instability follows, with riots on the streets and unemployment at levels not seen since the 1930s.
This nightmare vision has rattled investors around the word, driving the gold price ever higher. Of all the precious metals, it is the most popular as an investment. Since the earliest times, it has been seen as both a symbol of prosperity and a store of wealth. In the modern era, it has been bought as a hedge against economic, political or social crises, and as protection against the plummeting value of currencies. Continue reading and comment >>> Richard Wachman | Sunday, July 11, 2010
