Gold rallies on talk of attack on Iran

[truthpusher]

http://www.marketwatch.com/News/Story/Story.aspx?guid=%7B9E437DA5%2D32F1%2D42AB%2D9DDA%2D2A977D5ECF67%7D&dist=rss&siteid=mktw

Gold rallies on talk of attack on Iran
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By Ciara Linnane, MarketWatch
Last Update: 7:59 AM ET Apr 10, 2006
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NEW YORK (MarketWatch) - Gold futures rose to a fresh 25-year high above $600 an ounce early Monday, joining a broader commodities rally on talk of a possible U.S. attack on Iranian nuclear facilities.

Gold for June delivery was trading up $7.40 at $600.10 an ounce, having risen as high as $602.60 an ounce overnight.

The contract broke the psychologically key $600-an-ounce level last week for the first time since January 1981, before profit-taking set in ahead of the weekend.

The New Yorker magazine reported that the U.S. is stepping up preparations for a possible air attack on Iranian nuclear facilities, which may involve the use of nuclear weapons against underground sites.

(snip)

link: http://www.marketwatch.com/News/Story/Story.aspx?guid=%7B9E437DA5%2D32F1%2D42AB%2D9DDA%2D2A977D5ECF67%7D&dist=rss&siteid=mktw

[plasticsundance]

1. The Gold Bears always have an excuse

Gold has been flirting with the 600 level all last week. The reason the gold bears have to find new excuses for the rise of gold is because the rise of gold defies the rise in stocks. The rise of gold is also a sign of how many troubles there are with the dollar. In other words, the increase in gold exposes the "irrational" buying of corporate stocks. Gold is rising because the dollar is losing its value in what it can buy.

In addition, the appetite for gold still has yet to be quenched by China, India, and the ME.

Time to increase gold reserves

There is no doubt that gold is regaining its luster as an asset class. After it has been in a bear market for two decades, with prices plummeting nearly as low as $250 in 2001, its dollar price has more than doubled within four years and stays now well above $500. The women of India and the Middle East, who represent the two most important demand factors in the world gold market, have thus outperformed the sophisticated hedge funds of Wall Street with a very basic "gold, buy and hold" strategy.

The performance of gold-mining stocks is even more impressive: The HUI index of gold mining stocks rose from 35 to more than 300 in the same period.

There are ample reasons for this price hike: The U.S. trade deficit has spiraled out of control. Compared to its economic base, the accumulated debt in U.S. dollars has become too high to be effectively repaid; it will either default or will more likely be inflated to such an extent that it won't hurt to "pay" it back. Alan Greenspan's successor as governor of the Federal Reserve Bank, Ben Bernanke, has made this sufficiently clear when he said that the Fed would rather start the "electronic printing press" and let rain down free "helicopter money" on the people than face deflationary shocks.

Additionally, the market has become increasingly aware of the huge supply deficit in the gold market. According to Frank Veneroso (2001), who challenges the official statistics of the World Gold Council, mine production only accounts for roughly half of the annual demand and is declining. Apart from scrap supplies, the most important filling of the gap comes from the central banks, which sell and lease gold into the market.