Gold and the New World Currency for Oil
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Your Daily Profit

 

October 7, 2009

 

*****Australia’s Confidence

*****What’s France Thinking?

*****Newsletter Advisor Wednesday

 

Fellow investor,

 

Australia’s central bank raised interest rates by a quarter-point yesterday. Australia is the first G-20 country to act on its belief that global economic recovery has taken hold and that stimulus programs can start to be reversed.

 

Yesterday’s rally can be considered a response to Australia’s confidence. It can also be considered a response the sharp sell-off on Friday and a weaker dollar this week.

 

Gold rallied strongly yesterday as the US dollar dropped. That was significant. The Fed has essentially promised that interest rates will remain low into next year. If central banks around the world start hiking rates, and the US Fed stands pat, then US GDP has the potential to outperform. This potential is good for stocks, and possibly even unemployment. So stocks rally.

 

But keeping rates low as growth picks up invites inflation, so gold rallies.

 

Traders did a pretty good job of expressing these two somewhat contradictory themes yesterday.

 

Of course, inflation and growth can only co-exist for so long. Eventually, interest rates will have to rise to keep inflation in check.

 

*****Gold prices responded to another catalyst yesterday, though this one is much more in the “tin-foil hat” realm.

 

According to a story from the UK newspaper, The Independent, the six Arab states of the Persian Gulf, Japan, Russia, China and France have been holding secret meetings to work toward a world in which oil is no longer denominated in US dollars. In its place, they hope for a currency basket that would include gold as well as a proposed shared currency that would be used by the Arab States Gulf Cooperation Council (GCC).

 

Obviously the first question we must ask is…what is France thinking?

 

But seriously. A shared Arab currency, and oil priced according to a basket of both currency and gold are both pretty outrageous ideas. And who in the world would want to partially peg their currency with Russia’s ruble? However, gold bugs and conspiracy theorists alike love the idea of gold becoming a medium of exchange again. This report (rumor?) is right up their alley.

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*****It’s important to remember that gold prices move higher on the fear of inflation. And this fear is now on the rise.

 

The gold stocks in my Global Commodity Investor advisory service are benefiting with gains of 18%, 24%, and 68%. Also remember that gold mining companies typically enjoy an increase in their net asset value (NAV) equal to double the advance in gold prices. In other words, a 10% rise in gold prices should equal a 20% rise in a miner’s stock price. And when investors start buying gold stocks, the rise in stock price can be further amplified.

 

That’s exactly what we’re seeing in the Global Commodity Investor portfolio. For more on how you can leverage the rise in gold prices with mining stocks and tap into the commodities boom, CLICK HERE.

 

*****Today is NewsletterAdvisors.com Wednesday. Please enjoy the following interview with Louis Navellier from Blue Chip Growth.

 

Until tomorrow,

 

Ian Wyatt

Editor

Daily Profit





Posted 10-07-2009 11:12 AM by Ian Wyatt
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