Gold for Dummies

It's not gold you dummy!Please forgive my insinuation.No!I do not think anyone is a dummy.My point is simply this.Finally, we are getting some acknowledgment by analysts and experts that it is not gold that is actually moving up or down, it is the currencies of the world that are going down - the dollar along with them.Gold is simply acting as wealth protector while still hedging against fear of the unknown.

You've seen the commercial about central banks of the world all printing more and more money.That means all currencies are being debased at the same time.The gold price then becomes a measure of that debasement.Especially when central banks stop selling gold and become buyers.And, that is exactly what is happening.

I look at central bank buying as evidence they have taken a measurement of the relative value of many currencies and have determined they need to buy gold to hedge against the debasement of their own currency, and others.

Today's gold chart went a little nuts.Overnight the gold price dipped to $1284 an ounce and then some major players came in and said, "oh oh, here's a buying opportunity."Gold proceeded to roar back to new "dollar-related" highs.It could well have been central banks who were buyers.

Think about it.Anyone with debt benefits from a weakening currency.If, for example, debt is fixed in dollars, you would love the opportunity to pay back current dollars with cheaper future dollars.Creditors, on the other hand, (banks) become losers unless they hedge against the loss.Hence, they buy gold as their fate is sealed without it.You cannot lend money knowing you are going to get back less without taking action to counter the inevitable.It's that simple.

And who is one of the largest debtors of the world?We are!

Think how easy it will be to pay off debt if the dollar loses half its value through inflation.Sure, that gallon of milk will cost more, but you will earn more as well.

Remember, inflation and gold walk hand in hand.The relationship between the two will last till debt do us part.Only when debt goes away will the need to hedge against falling currencies go with it.

Now you can see how easy it is to predict $2000 gold or $5000 gold or maybe even higher.If all currencies are debased equally, there is no limit to how low they can go.