Gold’s Glass Ceiling There is widespread paranoia among goldbugs that some entity close to the US government quietly intervenes in the gold market when it reaches some invisible price target only known by those who foster the conspiracy. Several years ago, the glass ceiling number was $300 per ounce. Now that we are close to $400 the same kind of resistance seems to have been built into the markets. Several times in the last two weeks the price of the yellow shiny stuff started to cross $400 only to fall back. Once again, yesterday, it looked for a while like the momentum was building for a strong move across the goal line only to see late afternoon faltering. Gold, as you know, has no monetary value outside of a few coins that are minted in South Africa and Canada but it has traditionally been an anchor on which all but a few monetary systems remained tied to. Those paper or “fiat” currencies in the past that broke all links with gold or silver have consistently ended up on history’s abundant monetary trash heap. Politicians without the restraints of something real, will turn on the printing presses to save their skins. This is nothing new. Commodity traders will tell you that gold is a weak commodity trade since even when sold it is little consumed by industry (jewelry is sold by weight and value add, so the gold stock remains even after it is “used”) and has little other demand. Production, though relatively small, they will tell you, is sufficient to meet that demand. Even when it is hoarded as a safe island for investors, it remains intact, and can enter back into the market any time the price rises high enough for investors to make a profit. Furthermore, it is a lousy investment compared to stocks and bonds, they will say. So why would any government intervene by selling gold, since after all, all of the main holders of gold (the central banks) have pledged to stop selling in the open market? Is it psychological? After all, nobody, in the US, that is, seems to even notice how far down the dollar has fallen in the last 12 months –it now takes $1.19 to buy 1 Euro—so why would the price of gold have any psychological impact on American financial markets? I can’t say that I know and I am betting that gold goes over $400 and climbs above its last high of many years ago, of $416. The question then is, will it keep on going or is it merely following the Euro, Pound, etc. up as the dollar goes down? One thing is for sure, the dollar will continue to fall and gold will probably move in the opposite direction. So, does gold have some mysterious tie to the value of the dollar that someone in power may feel needs to be manipulated? We’ll see, soon enough. rmb dymaxionweb@verizon.net Copyright 2003 Richard Mendel-Black All Rights Reserved If you would like to reproduce any of RMB’s postings you must include the source of your quote and an email address dymaxionweb@verizon.net