Gold Surges to Two-Month High

Precious Metals Weekly (05/26/2009)
"Last week, Standard & Poor's, a leading credit rating agency, lowered its outlook for the UK economy, citing a rising debt burden in the years ahead. According to the Office for National Statistics, net public sector borrowing hit £8.46 billion this past April, representing a significant rise over the £1.84 billion figure the previous year. While this was not enough to change the rating, in 37% of such cases, revised outlooks lead to downgrades. An immediate impact of the rating warning was the further slide in the U.S. dollar, which hit a five-month low against major currencies over its own possible debt downgrade.

According to publically available data sources, the U.S. government has thus far spent approximately US$2.2-2.6 trillion of its estimated US$10.5-12.2 trillion in total commitments (source: NYTimes.com, CNNMoney.com), underscoring the burgeoning rise in U.S. money supply. The Adjusted Monetary Base in the U.S. rose by $100 billion to $1.85 trillion in the biweekly period ended May 20.

Our ultimate call on gold in support of our $1,100/oz peak gold price is the debasement of paper currencies and eventual inflation that we expect will result from the unprecedented government monetary and fiscal policies designed to reflate the world economies out of the global financial and economic crisis."

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