What’s Driving $1,300 Gold?

The price of gold has reached another big round number, breaking through the $1,300 mark today for the first time ever.

And at more than $21 per ounce, silver is higher than it’s been in three decades.

The Financial Times today ran an article that echoes something that we have been saying for months – the risk of “competitive currency devaluation” may now be the most important driver for precious metals investing.

Japan brought attention to the benefits of strategic devaluation when it openly took steps last week to weaken the yen. Japan’s prime minister says his government will do what it takes to keep the currency down.

And this week the Federal Reserve hinted at another round of quantitative easing, and as a result the dollar has seen a decline in value.

Japan, the U.S. and the European Union are all dealing with little to no economic growth at home, so they’re hoping their export sectors can lead the way. Keeping their currencies down is an important part of turning that hope into reality.

Here’s a link to a commentary I wrote back in February that discusses gold in a deflationary context, and which also touches on competitive currency devaluation. The basic view is that both deflation and devaluations make gold more attractive as a safe-haven investment.

And I also encourage you to visit Morningstar.com, which today has an article on how some funds have benefitted from their exposure to gold. Our Global Resources Fund (PSPFX) is one of the funds mentioned in the article.

Please consider carefully a fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.

Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk.

Because the Global Resources Fund concentrates its investments in a specific industry, the fund may be subject to greater risks and fluctuations than a portfolio representing a broader range of industries.

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About Frank Holmes 282 Articles

Affiliation: U.S. Global Investors

Frank Holmes is CEO and chief investment officer of U.S. Global Investors, Inc., which manages a diversified family of mutual funds and hedge funds specializing in natural resources, emerging markets and infrastructure.

The company’s funds have earned more than two dozen Lipper Fund Awards and certificates since 2000. The Global Resources Fund (PSPFX) was Lipper’s top-performing global natural resources fund in 2010. In 2009, the World Precious Minerals Fund (UNWPX) was Lipper’s top-performing gold fund, the second time in four years for that achievement. In addition, both funds received 2007 and 2008 Lipper Fund Awards as the best overall funds in their respective categories.

Mr. Holmes was 2006 mining fund manager of the year for Mining Journal, a leading publication for the global resources industry, and he is co-author of “The Goldwatcher: Demystifying Gold Investing.”

He is also an advisor to the International Crisis Group, which works to resolve global conflict, and the William J. Clinton Foundation on sustainable development in nations with resource-based economies.

Mr. Holmes is a much-sought-after conference speaker and a regular commentator on financial television. He has been profiled by Fortune, Barron’s, The Financial Times and other publications.

Visit: U.S. Global Investors

1 Comment on What’s Driving $1,300 Gold?

  1. Gold is strong because of

    (a) A $13.5 trillion national debt as well as $6 trillion debt of Fannie Mae and Freddie Mac, which the taxpayers are on the hook for but which is not carried on the county’s books.

    (b) Huge sovereign debt owed by several European countries with potential for default.

    (c) Huge debts with pending defaults from several large US States, counties and municipalities.

    (d) And most of all, $1.7 in Quantitative Easing already done by that monkey with a hammer, Ben Bernanke. Helicopter Ben is also planning another $3 trillion in Quantitative Easing in the nest 9 months. This guy is nuts.

    Gold should be selling for a hell of a lot more than it is.

    “There is no means of avoiding the final collapse of a boom brought about by credit expansion.
    “The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”
    ~~Ludwig Von Mises

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