Word: golds
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...early warning sign that the U.S. government's efforts to quell the recession will backfire. The fear is that the trillions of dollars the government is spending to safeguard the financial sector and boost the economy could result in massive deficits and mounting inflation. "People who are buying gold are buying into the argument that the Federal Reserve will not be able to take back all the liquidity it has poured into the market and protect against inflation," says James DiGeorgia, editor of the newsletter Gold and Energy Advisor. (See pictures of modern-day gold prospectors...
...unlike in the past, there is very little evidence to suggest that the recent jump in gold has anything to do with inflation. Gold prices started increasing around the time the government released results of the bank stress tests, which indicated that many of the nation's top banks would need little or no further financial assistance. Many point to the stress tests' positive results as the beginning of the end of the financial crisis. (See pictures of the global financial crisis...
...what is driving the price of gold? Adam says demand. And that's a good thing. As the credit crisis and global recession eases, more and more consumers, and industrial users like electronics manufacturers, are buying gold again. According to World Gold Council, demand for gold, while down from a year ago, rose 19% in the second quarter vs. the first three months of the year. Indeed, gold prices might be rising in anticipation of the normal holiday buying season...
...gold is not alone. A number of commodities are up. The price of silver, which has many more industrial uses than gold, rose 40% this year vs. just 15% for gold. Copper prices have nearly doubled. Indeed, the broad rise in commodity prices that are occurring now is usually an indication of a resurgence in the economy, not trouble ahead...
...Usually when gold rises, you think something wicked this way comes," says Ed Yardeni, a top Wall Street strategist. "But things got so bad this time that I think gold, like everything else, is responding to the perception that things are getting better...