Gold is trading at $1,118.00 per ounce. What is that number telling us? Pure and simple, the market is telling us that inflation is on the way. The Indian government just bought 200 tons of gold valued at over $7 trillion dollars. In other words they exchanged $7 trillion US dollars for the 200 tons of gold.
At the same time the December US dollar contract traded below 75.00 on a trade-weighted basis. What is that number telling us? Traders are turning in dollars for other investments, mainly stocks and commodities.
It would take a change in Federal Reserve policy to reverse the bull runs we are seeing in gold and stocks. That change is not in the cards at present. The Federal Reserve has stated that it will continue its loose money policy into the foreseeable future.
To summarize, whatever your beliefs, watch the price.
Do you believe that inflation is coming?