Gold goes up as Europe and US Continue to Print Paper Currency

Gold has gone up to touch all time highs. Despite the European Bazooka and the melt up in markets,gold has not come down from the highs it made during the Greek crisis.It’s a way of the market telling that they have now little faith in the paper currency being printed in the trillions by the developed countries.While there are many complexities in valuing gold due to its role as a “currency” as well as a “commodity” for use in decorative purposes,I think gold gains from here on due to the systematic risks.Rather than an inflation hedge , I think Gold goes up as the risks to the financial system rise . This plus the quantitative easing and buying of low quality bonds by the ECB and the FED makes the attraction of gold greater. I bought a  position in gold earlier and am thinking of adding more .

Gold Trades Near Record as European Debt Threatens Currencies – Bloomberg

Gold traded near a record in Asia after surging to an all-time high yesterday on investor concern that international financial support for indebted European states will depress currencies.

Bullion for immediate delivery lost 0.4 percent to $1,228.47 an ounce at 9:58 a.m. in Singapore after climbing to a record $1,234.50 yesterday. The previous high of $1,226.56 was set on Dec. 3.

Gold resumed its rally yesterday as the euro fell for the first time in three days on doubts that an almost $1 trillion loan package will be able to prevent Greece’s sovereign debt crisis being repeated in other European states.

“All we can do is to put our money into real assets because paper money everywhere is being debased,” Jim Rogers, Singapore-based chairman of Rogers Holdings, told Bloomberg Television today. “I’m not selling gold forever.”

Gold has climbed 12 percent in 2010, heading for a 10th consecutive annual gains. This year, the euro has dropped 12 percent against the dollar, the MSCI World Index of major equity markets fell 2 percent and returns on benchmark U.S. treasuries advanced.

June-delivery futures climbed 0.7 percent to $1,228.20, after settling 1.6 percent higher at $1,220.30 yesterday. The contract reached a record $1,235.20 late in the session.

Europe’s debt crisis “isn’t going to be that easy to fix,” said Gavin Wendt, senior resource analyst with Mine Life Pty in Sydney. Gold is being driven by “fear that, even though they’re throwing a hell of a lot of money at this, it won’t be resolved and that these debt issues will continue to spread to other countries, primarily Spain and Portugal.”

Magic Wand

“They’ve waved this magic trillion-dollar wand in front of everyone, but where is it going to come from?” Frank McGhee, head dealer at Integrated Brokerage Services LLC in Chicago, said yesterday. “They’re stopping a debt problem by creating more debt. Sooner or later, everybody stops trusting paper, and that’s the lure of gold.”

Among other precious metals, platinum for immediate delivery fell 0.4 percent to $1,698.35 an ounce, its first decline in five days. Silver was little changed at $19.2825 an ounce, after surging 4.2 percent to a five-month high yesterday. Palladium lost 0.2 percent to $532.75 an ounce after four days of gains.

Silver and platinum are likely to “wax and wane” with the underlying economic outlook, given their industrial uses, Wendt said. Gold reaching $1,500 by year-end would be “quite a reasonable price target” given the renewed demand, he said.

“There’s more reasons to hold gold now than there were even 12 months ago when we had the remnants of the financial crisis,” he said.