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New High For Gold


Gold hit a new high today in New York trading, moving to $1,310 per oz before settling down to $1,307 as of this writing.

Investors are moving into gold and other hard assets (silver has been hitting new recovery highs as well platinum, palladium, cotton, iron ore and many of the grains). The announcement of additional quantitative easing by the Federal Reserve, with the intent to add another 1/2 trillion dollars or more to the economy, has investors moving into the “stuff” and “stuff stocks” to take advantage of any inflation that might be coming down the road.

The Fed is very concerned about deflation, not inflation. They want to liquefy the economy to get core CPI up to their target levels in an effort to make sure the US does not follow the same path Japan has followed for two decades. However, not apparent in the CPI are the cost increases of raw materials – those have already begun to skyrocket.

The question is whether the producers here and abroad can increase prices to compensate for their increased costs or whether they will have to absorb those cost increases and their shareholders net a lower return. If they can increase prices, you will begin to see inflation as measured by the CPI increase. If not, look for it to impact stock prices as corporate earnings come under pressure.

We are taking a very cautious stance right now in regard to our investment management activities. Much is murky in the investment world and until it gets clearer, we are raising cash as the stock market moves to the upper edge of the trading range. But we aren’t selling our gold or hard asset stocks – its not yet time to take shelter from those.