Gold at $900

Gold briefly touched $900 and gold stocks have rallied significantly from their Nov. lows. In fact the gold stocks have led the price of bullion over the last two months.

I've also noticed that US Treasuries have backed off especially at the longer end. TBT is up 10%+ over its recent lows.

I read the following at Agora Financial's website.

Traders are also taking note that hedge fund manager David Einhorn is going long gold. “Our guess is that if the chairman of the Fed is determined to debase the currency,” Einhorn says, “he will succeed. Our instinct is that gold will do well either way: Deflation will lead to further steps to debase the currency, while inflation speaks for itself.”

Now I know inflation is probably a ways off still until we work off some of the debt deflation, but if the Fed is determined enough, they can create any amount of inflation they want. Gold has held up well over the last year against most asset classes except US treasuries and this speaks to its role as a currency. The chart of the British pound vs. the $US over the last 6 months is astonishing. Who would have thought that the London financiers would be on the brink of several bank nationalizations? I took note that gold has hit a high in Euros as well as the British pound today.

The global race to the currency bottom is on! Beggar thy neighbour. Even the Bank of Canada is getting in on the act and decreased interest rates in an attempt to jawbone the loonie down. Imagine 1% interest rates! Isn't ultra-low interest rates what started this whole credit mess? If a little of something is good more is better! If I was a little more confident that bad inflation was in the cards, I would re-mortgage the house and leverage up to buy some real assets and some more gold! Problem is deflation seems as likely as inflation at this point.