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Gold Prices Reach Record Highs As Japan’s Interest Rates And Currency Fall

October 11, 2010 by  

Gold prices reach record highs as Japan's interest rates and currency fallGrappling with a still-weak global economy, governments around the world are lowering interest rates in hopes of spurring growth. This has sent gold prices to record highs, offering new investment and asset protection options. 

On Oct. 4, the Bank of Japan announced that it would keep its overnight lending rate near zero, buy government bonds, real estate trusts and commercial papers in a bid to push longer-term interest rates lower, according to media reports.

This has caused the stock market to go up, and gold prices climbed to $1,333.80 an ounce in mid-morning trading, as commentators expected other nations' central banks to follow Japan's example. Silver prices also rose to a 30-year high.

Paul McCulley, of Pacific Investment Management Co., wrote in a note on his company's website that "U.S. growth trajectory [is] so slow you'd nearly call it stalled."

He added that this makes a new round of interest rates cuts likely.

Given that this type of approach tends to weaken the currency, individuals who would like to protect their wealth from the ravages of inflation may consider investing their assets in precious metals. 

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  • s c

    I’ve often wondered how it is that a nation like Japan could ‘borrow’ America’s production savvy, turn their country into an economic dyamo, and then find ways to act like they couldn’t care less about being an economic dynamo.
    I’m betting that Japan is ahead of America when it comes to appreciating precious metals. The Japanese learned the hard way in WWII that if a leader isn’t really a leader, then individuals must learn to compensate for that lack of leadership. Here, we’re just now beginning to realize that a non-leader is a strict liability.
    The basic rule is always 1) precious metals are good, 2) paper is bad and 3) if a leader isn’t a leader, dump the SOB. If you don’t understand #3, #1 and #2 won’t help.
    America, learn to appreciate precious metals. Distance yourselves from non-leaders who are no better than manure piles. A precious metal is always worth having. What’s elected manure worth?

    • Al Sieber

      I agree SC, but try and convince other people who will always believe paper currency is the answer.

    • James

      on July 20, gold was $1192/oz., yesterday it was $1353/oz. That’s a 13.5% gain in less than three months. However, a small cheesecake that I like went from $5 to %6, a 20% hike in price. Somtimes the gold price will exceed the rate of inflation, brought on by overzealous speculation, but it usually just reflects the dollar’s inflationary rate. Our old gold coins used to be worth, in dollars, what was stamped on their face. Now they are worth over 60 times that. Or stated otherwise, since the Federal Reserve system has been in existence, the dollar has lost about 95% of its value.

  • James

    Gold usually moves in opposition to stocks. but the reason it is moving up with stocks, now, is because investors know that there is no rational reason for stocks to advance. They are buying gold before the stock market crashes, probably just after the elections, when it will then easily top $1500/oz.

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