Heading of Economics: Gold and Inflation
Posted by LeGianT on September 8, 2009
By: Nicholas Larkin, Halia Pavliva and Kim Kyoungwha
“The market thinks inflation is coming,” Leonard Kaplan, the president of Prospector Asset Management in Evanston, Illinois, said by telephone. He has been trading gold for more than 30 years and believes gold won’t stay above $1,000 for long. “With interest rates so low, money is chasing money and the dollar is getting murdered.”
Governments have cut interest rates and boosted spending to fight the worst recession since World War II, spurring investors to buy bullion as a hedge against the prospect of accelerating inflation and currency debasement. Gold, silver and palladium holdings in exchange-traded funds have reached records.
Gold may set a record within five sessions and “it’s possible” that it will touch $1,200 within weeks, Prospector’s Kaplan said. “And if a new record doesn’t come soon, it doesn’t come in the near future,” Kaplan said. “Markets think that the Fed isn’t going to withdraw stimulus money fast enough and that would cause inflation.”
Crude-oil futures, used by some investors to forecast inflation, surged as much as 5.5 percent today and have soared 59 percent this year in New York.
“If they keep printing money to buy bonds it will lead to inflation, and after a year or two the dollar will fall hard. Most of our foreign reserves are in US bonds and this is very difficult to change, so we will diversify incremental reserves into euros, yen, and other currencies,” he said.
From: The Economist
U, V or W for recovery
Aug 20th 2009
The world economy has stopped shrinking. That’s the end of the good news
IT HAS been deep and nasty. But the worst global recession since the 1930s may be over. Led by China, Asia’s emerging economies have revived fastest, with several expanding at annualised rates of more than 10% in the second quarter. A few big rich economies also returned to growth, albeit far more modestly, between April and June. Japan’s output rose at an annualised pace of 3.7%, and both Germany and France notched up annualised growth rates of just over 1%. In America the housing market has shown signs of stabilising, the pace of job losses is slowing and the vast majority of forecasters expect output to expand between July and September. Most economies are still a lot smaller than they were a year ago. On a quarterly basis, though, they are turning the corner.