Gold Prices Hit $1385

December 2, 2010

Thursday December 2, 2010     Annuity News Journal     By Steve Johnson

Gold prices hit $1385 today as a reaction to the European Union’s financial bailout of the Republic of Ireland. The bailout is actually a loan given to Ireland in response to its economic meltdown last week, but many critics of the European Union’s decision see few signs that the country will be able to repay its debt. Gold wasn’t the only commodity up on the news from Ireland. Silver, platinum, and palladium, and oil all traded higher as well.

Although the dollar remained strong, many analysts see what has happened in Ireland, and previously Greece and Iceland, as a sign of tough times ahead for developed western countries in Europe and the United States. Even more concerning is that, unlike the Euro, the United State’s dollar is only backed by one country. This means that in the event that the United States creditor’s, like China, come calling for debt repayment, the dollar will not have friends to help bail it out.

Pressure has been put by some in Congress to capitalize on the high gold prices by selling off a portion of the United States gold reserves to buy back issued treasuries. Proponents for this argue that gold prices are currently high enough to rid the US of a significant portion of its national debt which could further strengthen its economy. Critics dispute this notion, stating that gold is far more valuable to the solvency of the economy than that of the paper dollar. By selling off gold reserves, the United States would be losing its most valuable financial insurance policy in the event that the dollar crashes.

The one thing that most experts do agree on is that the price of gold will continue to look bullish as long as developed countries’ economies continue to be weighed down by debt.