As the developed world continues to flounder and emerging markets with a penchant for gold continue to grow, the yellow metal's role is likely to increase, along with its priceAuthor: Geoff Candy
Posted: Wednesday , 12 Jan 2011
The gold price has little to do with gold, and everything to do with the state of the world. And, the world is in a rather parlous state at present.
This is the view of Gold Forecaster founder Julian Phillips. Speaking on Mineweb.com's Gold Weekly podcast, Phillips explains that he is spending quite a lot of time at the moment looking at the possibility of what he calls financial earthquakes: "You can take, say, five major trends that are changing the world at the same time, and when they start to bump into each other you're going to get far more than simply the five, they're going to spawn, each one, a greater crisis and a greater breakdown unless attended to rapidly and decisively. [In the next few years] - China will be the most powerful economy in the world in a world that's fragmenting fast. That is the background for gold."
He adds, that while there has been a lot of talk about the possibility of the collapse of currencies like the dollar and the euro, such collapses will not happen as they are the world's means of exchange. "But," he said, "They will fail as an accurate measure of value and this is where gold will come in - it will grow in stature as a measure of value."
According to Julian, the events of the last two years have resulted in a disjuncture between the developed and the developing world and, indeed, between individual countries; with perhaps the starkest contrast between the US and China.
A clear example of this disjoint is visible in the demand drivers for gold which, for the most part are likely to come from emerging markets like China and India.
"If you talk to any man who's never been wealthy and suddenly becomes wealthy, he tends to keep his basic values Many in the East believe that gold is money. They don't trust governments - they don't trust printed money issued by governments - they believe if it's safe and it's sound, and it's hidden away it can't be touched, it can't be damaged it can't be confiscated, therefore it is something to trust no matter what's going on outside.
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