The price of gold per ounce is exploding! Gold has gone up forty-six dollars in the last couple of days alone. Gold is now up eleven percent year-to-date. Gold has also broken above the critical $900 level.
I'm going to explain the reasoning behind the recent explosive move in gold. I'm also going to explain why I feel that the price of gold per ounce is going to rise even higher in the coming weeks and months.
Let's go back to a couple of weeks ago -
Federal Reserve Chairman Ben Bernanke, along with several other Fed governors began talking tough about inflation.
The financial markets wrongly got the impression that the Fed would begin to raise interest rates, possibly as soon as August. The dollar began to rise in response and gold sold off.
However, it soon became clear, after the most recent Federal Reserve Open Market Committee meeting that all the talk about the importance of a strong dollar and the concern about rising inflation was just that - TALK! In actuality, the Fed is more concerned about the state of the economy than they are about saving the dollar.
As soon as it became clear that the Fed wasn't likely to raise interest rates any time soon, gold began exploding to the upside!
If you think last week's action in the gold market was exciting, just wait. Over the long-term, the price of gold per ounce is going to move even HIGHER.
You see, the Fed is in a bit of a predicament -
If they raise interest rates, the weakened financial system could collapse. If they don't raise rates, the dollar will continue to weaken.
Sadly, the Fed's inability to raise rates will cause everyone to lose. The dollar will continue to fall and the economy will suffer because of higher inflation.