Reply #5: The price of gold touched $900 an once on Friday, a world record

[DFW]

When Clinton left office, the price of gold was under $300.

The price of gold is more a barometer of economic security
than anything else. You can't eat it, you can't live in it,
you can't ride it anywhere, and it pays no interest. Industrial
use has not risen appreciably, although the rise in the economic
fortunes of India and China could change that soon. Those two
countries have traditionally valued gold as a store of wealth,
and are awash in ever-depreciating dollars.

A Swiss colleague who recently retired from their largest bank
recently told me that people just want "out of the dollar." This
is the explanation for the wild ride upward in the price of gold.
As long as people can get rid of their dollars for gold, they will,
and never mind that at the end of the day, it is a lump of metal.
You can never eat it, and it will never heat your home in the winter.
If people want it, it is because they think it will protect them
against the weakness of another asset they hold, and right now, that
is the American Dollar.

A significant long-term drop in the price of gold will indicate a
rekindling of confidence in the dollar (not necessarily linked, but
a decent indicator). Unfortunately, most money managers see it rising
to $1000 an ounce. I usually disagree with them on this, as the rational
side of me just can't see the benefit of having bars of metal in the
safe as an investment hedge for the future. But Cheneybush's spending
my grandchildren's income on Iraq has overruled logic. China, India and
Europe now hold more dollars than we can possibly redeem, and they know it.

We rae definitely headed for scary times, and my greatest fear is that
Cheneybush has stuck us so far down a black hole that not even a Robert
Rubin can pull us back out this time.