Flight to Gold Continues

Struthers Resource Stock Report (04/09/2009)
"I don't want to go into a lot of analysis on gold, as these are historic and unprecedented times and all markets, including gold, will probably behave differently.

What you need to know is simple. Gold is Money! That is why central banks own it, the IMF owns it. That is why governments are intervening in gold to help make their currencies appear stronger to the gold currency. That is why investment demand is at records and there are shortages of all kinds in physical (coins, etc.) That is why the premiums to buy are high to buy physical. That is why the most astute and wealthy investors in the world are filling vaults in Switzerland and elsewhere.

The other thing you need to know. Gold is the only currency that is nobody's liability. It cannot default. It is the only currency that is not a promise from some government.

Paper money is only as good as the government and economy that it represents and, right now, there are very few governments and economies that are strong and will not weaken further.

Those who are ignorant/don't understand gold have argued it has been mediocre investment. With such a crisis, why has it not soared?

Gold ended 2008 up only 5.4% for the year during the credit crisis that claimed some of the biggest investment banks, including Bear and Lehman Brothers. I bet you can ask anyone and they would be ecstatic if their portfolio gained at all last year.

But in 2009, gold has not only held firm in a deflationary environment but has appreciated to record highs against major non-U.S. currencies in the face of a stronger dollar.

Indeed, fund managers said that currency volatility was a big factor to prompt investors to switch to the gold market to avoid losses.

"It's a flight from all cash to gold in any currencies right now, because it becomes obvious that everybody wants to inflate out of this problem," said Axel Merk, portfolio manager of the $310 million Merk Hard Currency and Asian Currency Funds in Palo Alto, California.

Merk said investors recently allocated more weight into gold because it has no counterparty risk, unlike traditional asset classes."

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