Every gold investor knows the rule of thumb: if interest rates rise in the U.S., then the dollar strengthens and weakens the gold price calculated in the American currency.
From this point of view, the latest bull market in gold (an ounce is currently 11 percent higher than at the beginning of the year at 1,278 dollars) is no more than a straw fire.
The normalization of low-interest policy is being seen in the USA. According to most observers, it is only a matter of time before interest rates rise in the other large economic nations.
Search For Safe Ports
One who does not believe in a straw fire in gold is Dan Steinbock (picture below). The publicist and founder of the Difference Group, who teaches as a researcher at the Shanghai Institute for International Studies in China and at the EU Center in Singapore, is convinced of the contrary. He believes that a new golden age is coming for investors.
Not surprisingly, Steinbock argues with the escape reflex against political uncertainties. The civil war in Syria, the volatility around North Korea, the upcoming elections in Germany and France, but also the new ice age between the USA and Russia: all this,
A New Gold Standard
According to the native Finn, the most common escape route is blocked. State bonds are no longer the obvious choice in view of the bubble in the bond market, which has been fueled by central banks all over the world. Steinbock, on the other hand, finds the precious metal much more attractive by virtue of the fact that it has been subordinated in many portfolios and undervalued in numerous key currencies.
The Asian specialist also drew attention to subtle shifts in world trade. Last March, the Russian Central Bank opened an office in Beijing. The two countries want to coalesce in the monetary policy - and possibly the Russians could become an important gold supplier to China.
Already there are speculations about a new common gold standard, which does not need the «Greenback» of the Americans.
The Rule of Thumb Forgotten
This comes from the fact that gold is no longer viewed only from the dollar perspective. According to Steinbock, 90 per cent of the demand for physical gold from outside the Americas already comes from India and China.
In the currencies of these countries gold has made a better return than in dollars.
To draw his conclusions is easy, says the financial scientist. Anyone who only follows the old dollar rule of thumb misses the potential that gold offers to investors around the world.
- Source, finews