CHESSNOID

Why is gold going higher?  Is it purely speculation and the new  asset bubble being inflated or is it the fear of inflation many investors are predicting?  I don’t really know the real reason but I would guess it is a combination of many things including a weakening dollar due to the record deficit.

NEW YORK (CNNMoney.com) —

Gold rallied to a intraday record Tuesday as the dollar weakened and investors remain concerned about the threat of inflation.

December gold was up $11.50 to $1,069.00 an ounce after climbing to a high of $1,069.70 earlier in the session. That topped the previous intraday record of $1,062.70 an ounce on Oct. 8.

Gold has been on a record-breaking run since prices rose firmly above $1,000 an ounce last month. Many analysts expect the rally to continue into next year.

When I talk about inflation it relates to how investors throughout the world view the value of the dollar. It is no secret that we don’t actually have the money when the Obama administration passes trillion dollar stimulus packages and bailout bills. The US dollar is continuing a downward trend that is definitely affecting the future of our economy. Some economists think it is ok to spend what we don’t have, but the reality is short term it might hold off the downturn. That doesn’t solve the problem long term and actually makes things worse.

Oct. 13 (Bloomberg) –

President Barack Obama’s effort to lead the world economic recovery by spending the U.S. out of its recession is undermining the dollar, triggering record commodities rallies as investors scour the globe for hard assets.

As threats of a financial meltdown fade, the currency is falling victim to an unprecedented budget deficit, near-zero interest rates and slow growth. The dollar is down 10 percent against six trading partners’ legal tender in Treasury Secretary Timothy Geithner’s first eight-and-a-half months, the sharpest drop for a new occupant of that office since the Reagan administration’s James Baker persuaded world leaders to boost the deutsche mark and yen by debasing the dollar in 1985. This year’s drop followed its best two quarters in 16 years.

As long as the dollar keeps getting weaker, the gold trend pointing up will have legs to keep running.